Higher Minimum Down Payment Required for Properties 500K+

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Canada’s Finance Department announced on December 11 that the down payment for insured mortgage loans on residential properties valued at $500,000 or more will soon be increased to 10% for the amount in excess of $500,000.

For example, the minimum down payment on a $600,000 property will rise from $30,000 to $35,000:

  • 5% on the first $500,000 = $25,000
  • 10% on the next $100,000 = $10,000

The down payment proportion could reach as much as 7.5% of the property’s selling price (see table below).

From January to December 2015, 7% of residential properties in Québec were sold within a price range of $500,000 to $1,000,000. Please note that since July 2012, mortgage insurers no longer provide coverage for properties selling for more than $1,000,000.

In our view, most people who were in the price range affected by this change were experienced buyers whose down payment was higher than the minimum amount. Therefore, this new tightening of the mortgage insurance rules should have a fairly limited impact in Québec, particularly outside the Montréal region.

This impact will no doubt be greater in the Toronto and Vancouver regions, where property prices are much higher and first-time buyers have fewer properties valued at less than $500,000 to choose from.

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