Who’s Affected by the Minimum Down Payment Increase?
If you’re buying a house today, brace yourself for the new down payment increase–It’s doubled from five per cent to 10 per cent!
The new mortgage rules which were announced in December came into play sooner than anticipated. Finance Minister Bill Morneau states that buyers purchasing any home with a price tag of $500,000 or higher are subject to the new rule, and will need to pay a minimum of 10 per cent of the insured mortgage—double the original down payment minimum. The rule is an effort to cool Canada’s hottest markets, like Toronto and Vancouver where a home under $1 million is now considered a steal. However, million dollar homes are still subject to 20 per cent—a number that remained unchanged today.
Will this change affect you? It depends on your situation. First-time buyers who have their hearts set on micro condos priced under half a million dollars have nothing to worry about—their down payment will remain at the low five per cent. Other first-time buyers who want to enter the market with a townhome or semi-detached house will feel the pinch of the increase. For some, this rule came as a surprise as many potential buyers who missed the window of opportunity must postpone their property purchase, find another source of funds, or consider a more affordable condominium.
This chart can help you get a better idea of what you would pay with the new down payment increase.