How a free $15,000 down-payment is so much more

In this guide you will learn how you could have close to $70,000 in equity in as little as 5 years time with a free $15,000 down-payment and a brand new townhome condominium you can be proud to call home:

But first, what is equity? It is the amount of your home that you own after subtracting any money owing on it. To calculate that value, you subtract your mortgage balance from the market value of your home.

What is the value of having equity? It can allow you to:

  • Receive cash after you sell the home and pay all related costs.
  • Borrow against it with a home equity loan or home equity line of credit (HELOC).
  • Use it for a down payment on your next home purchase.

To calculate and visualize how you build equity with a 5-year fixed-rate mortgage let’s take a look at a typical Mills condominium break-down with a free $15,000 down-payment with no additional down-payment added to the loan:

Amortization Period (Total Number of Years):25 Years
Mortgage Interest Rate:2.39%
Payment Frequency:Monthly
Payment Amount:$1,311.13
Mortgage Amount:$296,296.00
Mortgage Insurance Premium:$11,396.00
Mortgage Insurance Premium Rate:4.00%

Before we go any further, you may have a few questions, first what is a Mortgage Insurance Premium? It is the amount paid if you as a borrower were to make a down payment of less than 20 percent on your home loan. It can be paid either as a lump sum payment at the time of closing, or you can choose to have it added to the mortgage. In this example, we have added it to the mortgage.

Second, you may be pondering why the mortgage amount isn’t just the value of your purchase, after all $299,900 minus $15,000 equals $284,900 not $296,296‬. This discrepancy is caused by the Mortgage Insurance Premium which has been added to the mortgage. In this case, the Mortgage Insurance Premium of $11,396 has been subtracted from the down-payment value of $15,000 leaving you with a down-payment towards your loan amount of $3,604‬. If you take your purchase price of $299,900 and minus that value of $3,604 it equals your mortgage amount at $296,296‬. Now let’s continue to look at a typical amortization schedule of your potential payments over the next 5 years.

 Year 1Year 2Year 3Year 4Year 5
Yearly Payment Amount$15,733.56‬$15,733.56‬$15,733.56‬$15,733.56‬$15,733.56‬
Interest$6,986.07$6,774.70$6,558.22$6,336.51$6,109.44
Principal$8,747.49$8,958.86$9,175.34$9,397.05$9,624.11
Mortgage Balance$288,285.47$279,344.42$270,187.31$260,808.94$251,203.96
Total Mortgage Equity in 5-Years$48,696.04‬

**Table based off Canada Mortgage and Housing Corporation (CMHC) payment schedule, and values will vary based on mortgage rate and amortization period. This table is provided for discussion purposes only and North Ridge does not guarantee any of the values provided. We recommend speaking with your lender to get your customized mortgage breakdown.

If you’re wondering how we arrived at $48,696.04 for the total mortgage equity in 5-years, remember that equity is calculated by taking the market value of your town home ($299,900) minus the total amount owing on your home ($251,203.96).

If that value isn’t enough to wet your appetite for buying a new home, in addition to the free down-payment gifted through the City of Regina grant program, you also receive a 5-year tax exemption on your new home, here’s how those savings add up:

Year 1Year 2Year 3Year 4Year 5
$2,911.91$2,911.91$2,911.91$2,911.91$2,911.91
Total Tax Savings Over 5-Years:$14,559.55

**Estimated tax values only, based off of City of Regina 2020 Property Assessment for our Mills showhome location, and values will vary based on individual addresses. This table is provided for discussion purposes only and North Ridge does not guarantee any of the values provided. Always refer to your City of Regina Tax Assessment for accurate assessment values on your new home.

We recommend that if your mortgage loan allows it, that you utilize these tax savings to make a single lump sum payment of equal value every year on your mortgage, that way you’re accustomed to budgeting for that amount every month and will not be shocked when the time comes to pay. By making these valuable payments directly to the principal loan, that is payments directly to amount that pays off your outstanding loan, it means you’ll be able to pay off your mortgage faster and pay less interest in the long term.

When you add up the original down-payment of $15,000, your total mortgage equity, $48,696.04 with the tax savings of $14,559.55 that’s $78,255.59 of extra money you don’t have today! As you can see for yourself ‬there’s clear value in purchasing your new Mills condominium with North Ridge. This once in a lifetime opportunity not only gifts you your down-payment, but you are also receiving a built-in savings plan and tax savings which means you’ll have more money in just 5 years time to use towards a new home, or use to finance your children’s education down the road. Email or contact one of our experienced Sales Consultants to book a viewing today!

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