Minimum down payment increase – what you need to know
On February 15, 2016, the minimum down payment rules changed in Canada. On homes purchased for more than $500,000, the portion of the house price over $500,000 requires at least a 10% down payment. It used to be simply 5% down. The minimum down payment for the first $500,000 continues unchanged at 5%.
How much difference does it make?
Here’s a simple example… Before the change, you could get a mortgage for a $750,000 home with a down payment of $37,500. (i.e. 5% of $750,000). You now need a $50,000 down payment for the same house. The down payment is 5% for the first $500,000 ($25,000), plus 10% for the $250,000 over that (another $25,000). So, if you were applying for a mortgage on this $750,000 property after February 15, 2016, you had to come up with an additional $12,500.
Who was affected by the minimum down payment increase?
Anyone who was counting on being able to make a 5% down payment on their new home, with a purchase price between $500,000 and $999,999. Note that for homes purchased for $1,000,000 or more, the minimum down payment had been 20% since July 2012. “Changes to mortgage regulations… appeared aimed at cooling the Greater Vancouver and Greater Toronto housing markets,” according to Gregory Klump, CREA’s Chief Economist. “Minimum down payments [in Ontario] went up for homes that sell for more than half a million dollars. So, larger, more expensive housing markets were affected most.” The move was designed to protect Canadian homeowners by ensuring a stronger equity position in their homes. But, there is no doubt that some buyers, especially first-time homebuyers in places like Toronto, were knocked out of the market temporarily”, according to the Globe and Mail’s Rob Carrick.
If there’s a house purchase in your future, let’s talk
Please get in touch if you would like to chat. We can cover the steps to plan and secure enough down payment for your next home. And, we can discuss savings strategies, budgeting tips, and smart financial moves to ensure you’re well-prepared for this significant investment.
Want a bit more mortgage planning info?
For more on planning for your down payment, click here.
To read about what NOT to do if you’re going to be applying for a mortgage soon, check out my top 5 tips here.
To see my thoughts on what first-time homebuyers – make that ALL homebuyers – deserve, take a look at my post on that here.
And please don’t hesitate to comment below, or get in touch with any questions or feedback. I love hearing from my blog readers (this thing is a heck of a lot of work!).
Photo [c] Yulia Gapeenko for vecteezy.com
Minimum down payment Ontario
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