Ottawa: New Year Mortgage Down Payments Change

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Scott Boyd

December 14, 2015

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On Friday, Finance Minister Bill Morneau announced that Ottawa intends to increase the minimum down payment requirement for some new home purchases early in the new year. In order to qualify for Canada Mortgage and Housing Corporation (CMHC) mortgage insurance, as of February 15, 2016, down payment requirements will increase from 5% to 10% for the proportion of the selling price between $500,000 and one million dollars. Homes priced under $500,000 remain unaffected by this announcement.

“We want to make sure we create an environment that protects the people buying homes so they have sufficient equity in their home,” explained the Finance Minister.

Under current rules, “high-ratio” mortgages – those mortgages exceeding 80% of the purchase price – must be insured before a financial institution can provide financing. The CMHC is the largest provider of high-ratio mortgage insurance in Canada and is fully-backed by the Canadian government. By increasing the buyer’s equity stake in the new property, this move is also seen as an attempt to reduce the CMHC’s risk exposure.

Once the new minimum requirement goes into effect, the minimum down payment for a home selling for $800,000 (for example) will jump from $40,000 to $55,000. That's 5% on the first $500,000 which equals $25,000, plus 10% or $30,000 on the remaining $300,000, for a total down payment of $55,000.

Because the change only affects those seeking CMHC insurance on  properties valued over $500,000, the actual number of people affected is not expected to be significant.

“This will impact 1% or less of the market,” noted the Minister.