CANADA MORTGAGE DOWN PAYMENT RULES CHANGES

On December 11, 2015, the Canadian government announced changes to the Minimum Down Payment required for home buyers.

Minimum 5% down payment increase

The minimum 5% downpayment requirement has been increased for properties over $500,000. Properties under $500,000 can still be bought with 5% down payment.

Effective Dates for the New Canada Mortgage Rules

Effective immediately (Dec 11^th – Feb 14^th)  –  new down payment rules apply when The purchase price is greater than $500,000 and the closing date is after July 1st, 2016. 

Effective February 15, 2016 – new down payment rules apply on all purchases between 500,000 and 1,000,000*

New down payment rules:

PROPERTIES UNDER $500,000.

• the minimum down payment will remain at 5%. NO CHANGE.

PROPERTIES BETWEEN $500,000-$1,000,000

• the minimum down payment will be 5% on the first $500,000 and 10% on the residual portion greater than $500,000, but less than 1,000,000. THE INCREASE IS ONLY ON THE AMOUNT GREATER THAN 500,000.

For example:

A property with a purchase price of $600,000 will now require a total down payment of $35,000.

5% of the first $500,000 = $25,000

10% of the remaining $100,000 = $10,000

(this is an increase, as under the previous requirement total was 5% of $600,000, or $30,000)

Further details:

• CMHC Insurance premiums remain unchanged
• Agreements of Purchase and Sale entered into before December 11, 2015 may continue to fall under the old 5% down rules, even if the mortgage application was not submitted prior to Feb 15^th, regardless of the closing date (most common with new construction)
• If you as a Buyer go to your mortgage lender to get funds for a property you have purchased,  and you are approved under the old rules, if for some reason you then wish to change lenders and go to a different bank or mortgage lender, the 2nd bank can use the original CMHC insurer’s approval and approve you at the original terms, but only for the same purchase property, i.e. no change of address.

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  *properties over $1,000,000 are not eligible for CMHC insurance, and require the full 20% down payment                 

 with input from Sherry Love, mortgage specialist at Scotiabank Mississauga