Down payments soon to be higher on some mortgages
On December 11, without addressing the risk of a potential real estate bubble, Federal Finance Minister Bill Morneau announced that down payments on mortgages between $500,000 and $1 million would be doubled.
Minister Morneau’s decision appears to have been motivated by soaring real estate prices in Toronto and Vancouver. He hopes this measure will create more stability in the Canadian real estate market.
On February 15, 2016, the minimum down payment for new home buyers will jump from 5% to 10% of the purchase price for the portion of the price that exceeds $500,000.
This means that a new home buyer who purchases a $750,000 property will put down 5% on the first $500,000 and 10% on the remaining $250,000.
Example:| Purchase price | $750,000 |
| Minimum down payment: 5% on the first $500,000 10% on the balance ($250,000) | $25,000 $25,000 |
| Mortgage (before insurance premium) | $700,000 |
| Insurance premium (CMHC OR Genworth): 3.60% | $25,200 |
| Total mortgage | $725,200 |
On average, only 1% of new home buyers are likely to be affected by this new measure.
There will be no change for mortgages that do not fall into the $500,000 to $1 million range.
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