The New Down Payment Rule: What changed on February 15!

Christina Singh
by Christina Singh
Mortgage Agent/ Manager
March 7, 2016
Hugging Outside Of Home

On February 15, the Government of Canada effected a change to the rules for down payments. The change, which was officially announced on December 11, 2015, increases the minimum down payment for new insured mortgages from 5 per cent to 10 per cent, for the portion of the house price above $500,000.

The change does not affect home owners who hold mortgages obtained prior to February 15, and the 5 per cent minimum down payment for properties up to $500,000 remains unchanged.

What does this mean for consumers?

Before February 15, 2016, a 5 per cent minimum down payment was required for insured mortgages up to $1 million. For example, an insured mortgage for a home purchased for $800,000, prior to February 15, would have required a minimum down payment of $40,000 ($800,000 @ 5%).

After February 15, 2016, down payments for insured mortgages are divided in two: a 5 per cent minimum down payment is required on the first $500,000 of property, and 10 per cent is required on the remaining value. For example, an insured mortgage for a home purchased for $800,000, after February 15, will require a total minimum down payment of $55,000 (the first $500,000 @ 5% and remaining $300,000 @ 10%).

"We recognize that, specifically in the Toronto and Vancouver markets, we have seen house prices that have been elevated," Finance Minister Bill Morneau told reporters "and we want to make sure we create an environment that protects the people buying homes so they have sufficient equity in their home."