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% |
|---|---|---|
| Up to and including $500,000 |
No change. 5% |
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 |