Down Payment Rule Changes

Finance Minister Bill Morneau has announced rule changes to the minimum down payment allowed on insured purchases effective February 15, 2016. Leaving prospective home owners who were planning to purchase with the currently allowed 5% minimum, 2 months to purchase and have their mortgage approved.

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The minimum down payment on new insured mortgages after February 15, 2016 will remain at 5% for the first $500,000 of the purchase price and 10% for the portion over $500k.

Example: $750,000 purchase price. 5% on the first $500,000 = $25,000. 10% on the additional $250,000 = $25,000. Total Down Payment = $50,000

Purchase Price Minimum Down Payment
Up to $500,000 5% Minimum
$500,001 to $999,999 10% Minimum (5% on the first $500,000)
$1 Million 20% Minimum

On purchases above $1 Million to minimum down payment required will still be 20 percent. There is no down payment rule change on this amount.

“The Government’s role in housing is to set and maintain a framework that is equitable, stable and sustainable. The actions taken today prudently address emerging vulnerabilities in certain housing markets, while not overburdening other regions,” – Finance Minister Bill Morneau.

It remains to be seen how much of an impact, if any, this new rule will have on the housing market. The main idea is to give home owners a higher equity in hopes of maintaining stability in the housing market. For the vast majority of Canadians their home is by far their greatest investment, and the government’s goal is to help protect that. Whether or that this will be an effective measure is yet to be determined.

If you have been thinking about purchasing with 5% and have been on the fence or waiting until late winter, this may be incentive to act quicker and get yourself pre-approved. If you have any questions or need some clarification on today’s announcement, please call us at 905-265-0246 or email us at info@thefinancialforum.ca

What do you think of the rule change? Will this have a major impact, minor impact or no impact at all? Let us know your thoughts or concerns in the comments!

Have any questions, need any advice? Visit us at www.thefinancialforum.ca. Email us at mortgages@thefinancialforum.ca. Call us at (877) 335-4486.

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