Buying A Home Over $1M

Nowadays, buying a home over $1M is not that uncommon, especially in markets like Vancouver and Toronto where house prices have soared. Getting a mortgage when buying a home over $1M is a different world. What makes it different? The down payment.

Getting A Mortgage On A $1M+ Home

When seeking a mortgage when buying a home over $1M, consider that the down payment requirements will be a little higher. Most banks will use what is known as a sliding scale when the purchase price exceeds $1M. What this means is that the bank will only lend up to 80% of the value of the home up to $750K. Then they will only lend 60% on the remainder.

An Example To Illustrate

Take a $1.2M home. First, split the purchase price into 2 parts: $750K is the first part and $450K is the remainder (adds up to $1.2M).

The bank will lend up to 80% on the first portion: 80% of $750K = $600K.
The bank will lend up to 60% on the second portion: 60% of $450K = $270K.
Total loan amount: $870K

That means the necessary down payment will be $330K.

Since $330K/$1,200,000 = 27.5%, this means that you will need to come up with at least 27.5% down to purchase this $1.2M home. This is much higher than the usual minimum 20% down (or 5% for insured, high ratio mortgages).

Conclusion: if you are buying a home over $1M, you will need to come up with a bigger down payment than may be expected!

Robert Floris is a Mortgage Broker. His office is located at 651 Fennell Avenue East in Hamilton, Ontario. If you would like to speak with Robert, he can be reached at 905-574-9200 #215. Alternatively, you can contact Robert here.

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