Starting February 2016 mortgage rules tightened on homes over $500K

 The federal government is increasing the minimum down payment for higher-priced homes in Canada effective February this year.

Homebuyers are currently required to put down a minimum of five per cent to qualify for Canada Mortgage and Housing Corporation insurance. Once the new rules are implemented in February 2016, someone looking to buy a $750,000 home would need to have a minimum down payment of $50,000, which is what you get when you add five per cent of $500,000 and 10 per cent of the remaining $250,000.

Homes priced at more than $1 million by law require a minimum down payment of 20 per cent, and therefore the CMHC guarantee doesn't apply.

According to the Canadian Real Estate Association, average home prices in Toronto are now more than $630,000 — a 7.5 per cent increase over last year. In Vancouver, the average is now close to $1 million — rising by more than 15 per cent in the last year alone.

Some researchers believe this measure will have a minimal impact on house sales and prices, that this is implemented to deter a very small segment of buyers from going into the market with a very small equity position and to decrease the vulnerability of the CMHC.

Factors driving home price gains in Toronto and Vancouver, limited detached-home supply, high demand, low mortgage rates and inflows of foreign wealth, will still play the same role despite of this new mortgage tightening. 

Qualified borrowers who get approved before February 15, 2016, can still buy with only 5% down. But lenders will likely set their application submission deadlines 1-2 weeks earlier.

People will still pay the same default insurance premiums, based on their overall loan-to-value.




Samar Manuel

Samar Manuel

Sales Representative
CENTURY 21 Infinity Realty Inc., Brokerage*
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Samar Manuel