On February 15, 2016, minimum down payment 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% down payment for an insured mortgage. The minimum down payment for the first $500,000 will remain unchanged at 5%. How much difference could it make?Heres a simple example:
Right now, you could get a mortgage for a $750,000 home with a down payment of $37,500: a simple 5% of $750,000. Once the new rules kick in next month, youll need $50,000 down payment 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 home buyers will be unaffected, the move is designed to protect Canadian homeowners by ensuring a stronger equity footing in their homes.
If theres a house purchase in your future, DoYourOwnMortgage.com can help. We have access to great rates, and we offer our clients a no strings attached cash rebate for completing their mortgage application online. 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. Check us out at www.DoYourOwnMortgage.com
Here is a handy chart that outlines the impact of the New Minimum Down payment Requirement
|PURCHASE PRICE||NEW DOWN PAYMENT REQUIREMENT|| OLD DOWN PAYMENT
REQUIREMENT OF 5%
|Up to and including||No charge.|
|$500,000||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|
**Cash rebates are paid on funded deals on the 15th and last day of the month the deal