A down payment is the most important obstacle standing between you and your property purchase. If you can clear that hurdle, you’re well on your way to owning a home or investment property! 

One of the most common questions we receive on this topic is: what is the minimum down payment required to buy a home? There’s lots of debate surrounding what the options are and what the ideal amount might be.

But really, the answer is that it depends on your personal situation. Let’s start with what the banks allow, then we’ll discuss how to determine your best option.

The minimum down payment to purchase a property that you intend to live in (owner-occupant) is 5% minimum. Now, there is a caveat: any amount between $500,000 to $1,000,000 requires 10%.

If you do not intend on occupying the property, if this is an investment, the bank says that you have to put a minimum of 20% down.

Bear in mind, if you are intending to occupy the property, you can put anywhere between 5% to 20% down – or even more! While most people want to know what the minimum is, the follow-up question is always, “What’s right for me?”

Here’s how to find that answer.

Factor 1: do you have access to more money?

If you have access to more money than is required to cover the minimum down payment, you’re in a good position to put more than 5% down.

Factor 2: what is the maximum amount you’re willing to pay monthly?

What are the monthly cash flows you’re looking to get out of this property? The answer will determine what your budget is going to be. If this is not an investment property and you’re not necessarily planning to earn income from the purchase, it boils down to how much is in your budget for a monthly mortgage payment.

Factor 3: are you a financially literate person?

Are you somebody who invests a lot of money and does pretty well in the stock market, or potentially other avenues? If the answer is yes, then we would say: put in as little as 5%. Put the minimum down to get into the property that you want.

Because regardless of if I put 5% or 20% down on a property, it’s going to appreciate the exact same amount. Your down payment has no impact on how much this property will appreciate, and thus does not affect your eventual return.

If you’re not a financially literate person or a strong investor, we’d advise you to put as much down as you can. You might as well lower your monthly carrying cost and make sure that your investment is protected in one space.

Want to know more about down payments and entering the property ladder? We’re here to help! Tap into our experience and reach out to our team today.