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On December 11, 2016 the Canada’s Minister of Finance changed the rules for minimum down payments for purchasing real estate. Relax, the change is minimal, so whether you are a buyer or a seller, these new rules will probably be not only seamless, but painless as well.

Four things that have NOT changed:

1. If you are purchasing an investment property, there is no change: 20% is still the minimum down payment.
2. If your purchase-price  is $1,000,000 or more, there is no change: 20% is still the minimum down payment.
3. If your purchase-price  is $500,000 or less, there is no change: 5% is still the minimum down payment.
4. If you have less than 20% down payment, then your mortgage must be insured against default, with a premium paid to CMHC (Canada Mortgage and Housing Corp.), Genworth Financial or a similar financial institution.

The change is as follows: For the purchase-price amount between $500,000 and $1,000,000, you will require 10% down payment, instead of the previous 5%. Remember, this is blended, because the first $500,000 is still pegged at 5% minimum. The chart below explains the effect of this rule change.

chart new2

A couple can still borrow $25,000 each for their RRSPs, which would be the down payment on an $750,000 house or condo, leaving a $700,000 mortgage. Move-up buyers are likely to have the necessary minimum down payment from the proceeds of the sale of their current home. Looking at this realistically, if you or your buyer were getting a $900,000 mortgage, don’t you think it is prudent to put down at least 7.2%?

The new rules are effective February 15, 2016. Your Agreement of Purchase and Sale must be accepted before this date, although the transaction can complete after February 15.

Looking to buy or sell?  Call me anytime. Let’s get going!

– Chip Barkel, MCNE, SRES, Toronto Real Estate. Extraordinary Service. Top Results.