After the announcement Dec 11th by Finance Minister Bill Morneau, many consumers were unclear about the real numbers for changes to down payment rules. Specifically to the new minimum down payment requirement, which takes effect on February 15, 2016. The new rule applies to insured mortgages only – those where the borrower has less than 20% down payment for a purchase and requires mortgage insurance through CMHC, Genworth or Canada Guaranty.
the real numbers for changes to down payment rules
Home buyers looking to purchase a property over $500,000 – will need to dig a bit deeper for their down payment as they will no longer be able to purchase at that price point with only 5% down. In other words, 5% down will be required on the first $500,000, and 10% down will be required on the next $500,000.
For example a $750,000 property purchase will mean a 33% bigger down payment, or another $12,500. For purchases over $1M the existing mortgage rule applies – no insured mortgages for purchases over $1M.
For more details visit the Minister of Finance site at http://www.fin.gc.ca/afc/faq/hdpmeh-mfperpc-eng.asp
The Real Numbers for Changes to Down Payment Rules
| Purchase Price | Down payment first $500K (5%) | Down payment over $500K (10%) | Total down payment |
| $500K | $25,000 | 0 | $25,000 |
| $550K | $25,000 | $ 5,000 | $30,000 |
| $600K | $25,000 | $10,000 | $35,000 |
| $700K | $25,000 | $20,000 | $45,000 |
| $800K | $25,000 | $30,000 | $55,000 |
| $900K | $25,000 | $40,000 | $65,000 |
| $1M | $25,000 | $50,000 | $75,000 |
| $1.1M | No insured mortgage | Must have 20% down | $220,000 |
Important Timing – For buyers wishing to purchase under the current rules the mortgage application must be approved before the changes take place. This is a good time to connect with your mortgage broker to set an action plan on moving forward. If you wait till February there will be a backlog and you may miss out.
This new rule applies to down payment on a purchase only. There is no impact on homeowners renewing their mortgage, switching to a new lender, refinancing their existing mortgage, or on the purchase of a property with more money down.
Note – Borrowers will still pay the 3.6% insurance premium for an insured mortgage (5%-9.99% down) under the new tiered down payment for properties with the rule change. No extra premium cost will apply.
Other more subtle changes to the mortgage industry and how it impacts borrowers include the securitization fees and capital requirements by CMHC which lenders will likely pass on to consumers with an increase in interest rates. This rule takes effect July 1,2016. More details to follow.
http://www.cmhc-schl.gc.ca/en/corp/nero/nere/2015/2015-12-11-0900.cfm