New Mortgage Down Payment Rule
On December 11, 2015 the Finance Minister Bill Morneau announced changes to the rules related on how much mortgage down payment for government-backed mortgage insurance the consumer must provide. As stated in the Department of Finance Canada’s press release, the purpose of new mortgage down payment rule changes are “to contain risks in the housing market, reduce taxpayer exposure, and support long-term stability.”
The new mortgage down payment rule comes into effect on February 15, 2016 for home purchase prices above $500,000 with changes to the minimum down payment amount a home buyer can provide. Up to a home purchase price of $500,000 the 5% mortgage down payment rule is unchanged. Any amount above and beyond $500,000 the borrower must now provide 10% of the above and beyond amount.
Here’s how to calculate how much mortgage down payment you will need if the purchase price is more than $500,000.
Before the mortgage down payment rule becomes effective
Purchase price: $750,000 x 5% = $37,500
Mortgage amount: $750,000 – $37,500 = $712,500
After the mortgage down payment rule becomes effective
Purchase price: $750,000
$500,000 x 5% = $25,000
$250,000 x 10% = $25,000
Total down payment you will need is $25,000 + $25,000 = $50,000
Mortgage amount: $750,000 – $50,000 = $700,000
For the above example and comparable, after February 15, 2016 when the new mortgage down payment rules come into effect the borrower will need to have an additional $12,500 to pay towards the down payment.
Curious to know how much the mortgage payment’s will be? Head over to our mortgage calculator page. You can select a mortgage rate from any of our mortgage terms on our mortgage rates page to use in the mortgage calculator.
Contact us for more complex calculations and for any questions you may have regarding the new mortgage down payment rule or any other mortgage related questions. We’re here to help!