As of February 15, 2016, the Government of Canada has increased
the minimum down payment required for higher-priced homes across
For those consumers that were unable or unwilling to produce the
mandatory 20% down payment for home purchases, Canada Mortgage and
Housing Corporation ("CMHC"), provided mortgage loan
insurance so that the lender was protected against loss if the
borrower defaulted. CMHC historically required a minimum down
payment of 5% to qualify for its insurance program.
Due to concerns over affordability, financial stability, and a
potentially overheated housing market, CMHC will now require a 10%
down payment on the portion of the mortgage it insures that is over
$500,000. The 5% minimum will remain for the portion of the
mortgage up to $500,000. Note that by law all properties over
$1,000,000 require a minimum down payment of 20%, and therefore the
CMHC rules do not apply to such purchases.
For example, if a consumer is looking to purchase a home for
$650,000, CMHC will now require a down payment of $40,000 (i.e.
$25,000 on the first $500,000 and $15,000 on the remaining
$150,000). Whereas under the old rules a down payment of $32,500
would be required (i.e. 5% on the full $650,000).
It is expected that the new rules will have the most impact in
overheated housing markets such as Toronto and Vancouver, but could
have a significant impact in Calgary as well. The bottom line is
that consumers looking to purchase homes over $500,000 may be
forced to save up for a few more years before CMHC is able to
insure such mortgages.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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