On February 15, 2016, minimum downpayment rules are changing in Canada - for homes worth more than $500,000. The change is straightforward: for any portion of the house price over $500,000, buyers will need to provide 10% downpayment for an insured mortgage. The minimum downpayment for the first $500,000 will remain unchanged at 5%.
How much difference could it make? Here's a simple example:
Right now, you could get a mortgage for a $750,000 home with a downpayment of $37,500: a simple 5% of $750,000. Once the new rules kick in next month, you'll need $50,000 downpayment for the same house: 5% for the first $500,000 ($25,000), plus 10% for the $250,000 over the limit (another $25,000).
The change was announced in mid-December by the new Liberal Finance Minister, Bill Morneau. While most Canadian homebuyers will be unaffected, the move is designed to protect Canadian homeowners by ensuring a stronger equity footing in their homes.
If there's a house purchase in your future, let's talk. You will need a mortgage approval before February 15 to qualify under the 5% rule, and your purchase must also close before July 1, 2016.
Here is a handy chart that outlines the impact of the New Minimum Downpayment Requirement
|Purchase Price||New Downpayment Requirement||Old Downpayment Requirement of 5 percent
|Up to & including $500,000||No change. 5% - up to $25,000||up to $25,000|
|$600,000||5.8% - $35,000||$30,000|
|$700,000||6.4% - $45,000||$35,000|
|$800,000||6.9% - $55,000||$40,000|
|$900,000||7.2% - $65,000||$45,000|
|$999,999||7.5% - $75,000||$50,000|