Home buyers are urged to listen up: the federal government is boosting the minimum down payment for high-end homes.
Right now, home buyers are required to put a minimum of 5% down to qualify for Canada Mortgage and Housing Corporation (CHMC) insurance — protection lenders usually insist on when providing a mortgage worth more than 80% of the home's value.
Starting in February, CMHC will require a 10% down payment on the portion of any mortgage over $500,000. The 5% rule remains the same for the portion under $500,000.
Once implemented, that would mean someone looking to buy a $750,000 home would need to have a minimum down payment of $50,000: which is 5% of $500,000, plus 10% of the remaining $250,000.
The Liberal campaign platform this fall promised the government would review escalating home prices in high-priced markets, like Toronto and Vancouver, and "consider all policy tools that could keep home ownership within reach for more Canadians."
Several consecutive years of record low interest rates have enticed new buyers into the housing market.
But should those rates rise in the future, expensive homes — particularly those over $500,000 in hot urban and suburban markets — may become unaffordable.
Home buyers for properties valued below $1 million who are unable to make a down payment of at least 20% of the purchase price are eligible to have their mortgages insured by CMHC. That insurance system could be strained in some markets should rates rise.
Related Stories
