Mortgage Intelligence

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House over $500,000? New downpayment rules in February.

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Image by courtesy of expertbeacon.com

Image by courtesy of expertbeacon.com

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

Looking to buy a home and trying to make sense of the downpayment calculations? It’s worth having a conversation with an expert at MiMortgage.ca to findout how of downpayment you will need to have. Contact us now to speak to an expert.

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Author: mimortgage.ca

David Hetti is a full time Mortgage Broker with Mortgage Intelligence (FSCO Lic MO8002434) David is the Director of Operations at Mortgage Intelligence Oshawa and heads a team of full time licensed Mortgage Agents serving all of Ontario. David is also a licensed Insurance Consultant.

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