New Down Payment Rules: 10% Needed Between $500,000 and $1-million

11.12.2015

CMHC Changes to Down Payment Amount

This week, the Canada Mortgage and Housing Corporation (CMHC) – an institution offering mortgage loan insurance for mortgages with under 20% down – changed some of their rules regarding down payments.

Typically, if a Buyer has a high ratio mortgage (one where the down payment is less than 20%) they need to be approved for mortgage insurance, which is a cost that is added to your monthly mortgage payments. This insurance approval is in addition to mortgage approval and is handled by your Mortgage Broker. Properties with a sale price over $1-million need to have at least 20% down. 

High-ratio mortgage: A mortgage loan higher than 80% of the lending value of the property. This type of mortgage must be insured — by CMHC or a private company, for the benefit of the approved lender, against payment default.

CMHC has recently changed their rules when it comes to the amount of downpayment needed. One of our preferred Mortgage Brokers, Eitan Pinsky, breaks down this new down payment rule:

  1. Homebuyers will have to put 10% down on the portion of the price between $500,000 and $1-million. 

    * For example: If you purchase a home for $800,000, the minimum down payment needed would be 5% on $500,000 ($25,000) and 10% on the additional $300,000 ($30,000) for a total down payment of $55,000. This would be 6.88% of the purchase price, rather than the previous minimum of 5%.

  2. Goes into effect: February 15, 2016. If your mortgage approval is before February 15, 2016, you will be allowed to purchase with 5% down up to $1-million; even if the purchase date is after February 15, 2016.

Keep in mind that any property over $1-million will still need a down payment of at least 20% of the purchase price.

Contact Eitan Pinsky for more information about this new down payment rule, or to discuss your mortgage needs: [email protected] or 778-990-8950.

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