While it's true that one can purchase a home with just a 5% down payment, or even 0% in some cases, it may not be the most ideal option for your financial situation or your long-term investment goals. There are a number of benefits to saving more than 5% before purchasing your home, all of which put you in a better position sooner.

With the price of homes today, saving more than 5% down can be difficult for some. If this is the case for you, speaking with a financial advisor may give you some valuable advice on how you can increase your ability to save. An advisor can help you find ways to reduce your outgoing payments in order to retain more of your money for a future down payment, and all within a much shorter time period than you might expect.

It may sting a little to make a large down payment now, but it can reward you in the future; here are some benefits:

1. Less Mortgage to Carry

By saving more for a down payment, you're ultimately reducing the amount of your purchase you'll have to mortgage. This will significantly reduce your monthly mortgage payment, and save you tens of thousands of dollars in interest over time.

By reducing your mortgage payment, you may be able to put away the extra money you may have spent on a higher payment, and apply these savings as lump sum payments on your mortgage. This type of payment is applied directly to the principle balance of your mortgage, putting you further ahead and allowing you to potentially pay it off much sooner.

2. Appeal to Lenders

Another advantage to saving a larger down payment is your appeal to lenders. The more financial commitment you make toward the purchase of your home, the more lenders are willing to mortgage the property at a lower interest rate. You become less of a risk by increasing your cash investment, and thus lenders are more willing to offer competitive lending rates.

This will also save you tens of thousands of dollars in interest for the duration of your mortgage. Even a difference of a 0.5% interest rate saves you $5,000 in payments and $70,000 in interest…in just one year!

3. Avoid Default Insurance Premiums

If you invest less than a 20% down payment in your home purchase, Canadian Mortgage and Housing Corporation (CMHC) applies a mandatory insurance fee to protect your lender from the risk of default. This fee can quickly cost thousands and affect your mortgage payment amount. If your new home purchase price is over $1,000,000, however, 20% down payment is mandatory as default insurance is not available on homes over this price.

4. Offset Upgrade Costs

Even if you can afford a higher mortgage payment, the benefit to putting more down could be to offset your upgrades. Having higher home standards are worth the money, and why not invest upfront if you're able?

Instead of mortgaging your beautiful granite countertops, porcelain tile flooring, or any structural changes you plan to make, offset those costs with additional down payment.

5. More Equity

By applying a larger down payment, you also create more instant equity that will carry throughout the life of your investment. Should you ever decide to sell your home, you’ll experience far less anxiety about your asking price and give yourself wiggle room to negotiate.

Even in a “down” market you’ll be comfortable knowing your home’s value is higher than what you owe. By having more equity from the get-go, you’ll also maintain a financial power position in your other credit dealings.

6. Better Negotiating Room

When your mortgage term is up for renewal, the more equity you have, the better your chances will be to negotiate a better rate and terms for your renewal. You’ll have the ability to shop other lenders, who will ultimately compete for your business. Who wouldn’t want to be in that position?

Financing your new home purchase is something you want to be strategic about. Take the time to run numbers through a mortgage calculator, and discuss your options with your builder, as they may be able to set you up with their preferred lender. When making these important decisions, focus on the long-term benefits that can keep you happier in your new home longer.

Photo credits: money scale, calculator