You may have already heard about the upcoming rule change affecting the minimum downpayment on insured mortgages. I want to break it down so it’s clear how this new change affects your current and future mortgage financing options.
Who & What
There has been an increase to the minimum downpayment required for properties with a purchase price of $500,000 or more. If you are buying a home in that range, the new minimum downpayment will be 10%. If you’re buying a home with a purchase price under $500,000, the minimum downpayment requirements remains 5%. Because of this, there is a tiered approach to the minimum downpayment required for homes over 500K. That means you’ll pay a minimum 5% downpayment on the first $500,000 and then 10% minimum for any amount over and above the first $500,000.
For example, if you bought a house for $650,000 today, you would only need a minimum 5% downpayment, or $32,500. After the change, you would need a minimum $40,000 downpayment; $25,000 for the first $500,000 (5%) and $15,000 for the remaining $150,000 (10%). See the chart below for a breakdown of how it will affect different purchase price ranges.
When
The new change comes into effect on February 15, 2016. In order to avoid this new rule, you need to have a firm Offer to Purchase submitted to the mortgage lender and insurance company by at least February 15th, AND it must have a possession date of July 1, 2016, or sooner. Pre-approvals are not eligible. Some lenders may implement the new downpayment requirements earlier than February 15th to prevent an application backlog. So if you’re thinking of buying a home over $500,000, it’s better to make your offer sooner than later.
How (much)
Here is a quick reference table that details how impactful the new minimum downpayment rules will be;
| PURCHASE PRICE | NEW DOWNPAYMENT REQUIREMENTS(After Feb 15) | OLD DOWNPAYMENT REQUIREMENT OF MINIMUM 5% (Before Feb 15) |
| Up to & including $500,000 | 5% – $25,000 | 5% – $25,000 |
| $600,000 | 5.8% – $35,000 | $30,000 |
| $700,000 | 6.4% – $45,000 | $35,000 |
| $800,000 | 6.9% – $55,000 | $40,000 |
| $900,000 | 7.2% – $65,000 | $45,000 |
| $999,999 | 7.5% – $75,000 | $50,000 |
If you’re unsure how this upcoming change will affect your personal mortgage situation, reach out to your favourite mortgage professional to get clarification.
For all your mortgage needs, contact Jackie at 780.433.8412 or info@mortgagegirl.ca. Stay in the loop by following on Twitter @Mortgagegirlca.
