Purchase Before February 16, 2016 with Less Money Upfront / A Lower Down Payment
It was recently announced that the minimum down payment rules for insured mortgages in Canada are changing on purchases after February 15, 2016. These changes have created confusion for consumers, so Fifth Avenue is here to help clarify what this really means to you. If you are planning on purchasing a home under $500,000 after February 15th this year, this rule change does not affect you at this time. However, if you are planning to buy a home over $500,000 this change could increase the amount of down payment or deposit you will need to make to purchase by 1/3 or more.
Basically, instead of a minimum down payment of 5% on the purchase price of the home, you will be paying 5% on the first $500,000 and 10% on the remaining portion over $500,000.
So if you bought a $750,000 home today, your minimum down payment would be calculated as 5% on the entire purchase price. 0.05 X $750,000 = $37,500 minimum down payment.
After February 15th, 2016 the minimum down payment would be calculated as 5% on the first $500,000 and 10% on the remaining $250,000. (0.05X $500,000) + (0.10 X $250,000) = $50,000 this is an increased upfront cost of $12,500 or 1/3 more savings required.
Let’s Break it Down.
Remember the new rules only affect those looking at purchasing a home priced between $500,000 and $1,000,000.