House over $500,000? New downpayment rules in February 2016
January 6 2016 Posted by
House over $500,000? New downpayment rules in February 2016.
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 |
Up to $25,000 |
|
$600,000 |
$30,000 |
|
|
$700,000 |
$35,000 |
|
|
$800,000 |
$40,000 |
|
|
$900,000 |
$45,000 |
|
|
$999,999 |
$50,000 |
Mel Gilbert, AMP
Mortgage Agent, Level 2, AMP
.jpg "Mel Gilbert, AMP")
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