Minimum Down Payment for Income Property (Duplex, Triplex, Fourplex, Multiplex)

Down Payment Income Property

Duplex down payment

Here is what I believe to be one of the greatest advantages of a duplex.  The minimum down payment for the owner-occupant is only 5%. In fact, when it comes to down payments, the duplex is identical to a house or a condo. This means that at the time of purchase, if you plan on living in the building, the down payment will be 5% of the sale price for a purchase insured with a mortgage insurer (CMHC, Genworth, Canada Guaranty). However, if you do not intend to live in the duplex or if you prefer to avoid mortgage insurance fees then the minimal down payment will be 20%.


Minimum down payment for a triplex

When you want to purchase a triplex as an owner-occupant, the minimum down payment, with mortgage insurance, is 10% of the purchase price. Once again, if you do not intend to live in the triplex or to avoid mortgage insurance fees, you must have a down payment of 20%.


Minimum down payment for a fourplex

The down payment rules for a fourplex are identical to those of a triplex.  Therefore, if you plan on residing in the building the down payment is 10% of the purchase price, always through mortgage insurance.  If you wish to purchase it as a rental investment or if you simply want to avoid mortgage insurance fees then a 20% down payment will be required at the time of purchase.


The bank may require a down payment greater than 5%

The situation described below rarely happens so you should not worry too much.  However, it is always helpful to be informed.

In fact, the bank will never lend more than 95% (plus insurance fees) of the lower of the 2 following values: the price paid or the estimate of the property’s market value.  If you already purchased the home, the lending institution may request a market value assessment of the property.  Let’s say you paid $200,000 for the house and you plan on putting a 5% down payment for a total amount of $10,000. The market appraisal values the home to be worth $190,000. The smallest amount is therefore the market value estimate. The bank will not be able to lend you more than 95% of $190,000, so $180,500. Your minimum down payment will then be $200,000-$180,500 = $19,500. It is sometimes possible to challenge this assessment, but you must present comparables and have valid arguments.

In the event where the market value is assessed at $220,000, the institution will then be able to finance 95% of the price paid ($200,000) and your down payment will be $10,000 as planned.


Minimum down payment for a multiplex

Let me begin by clarifying what I mean by multiplex.  A multiplex is a residential property with at least 5 units.

When we are looking at 5 or more units, the rules regarding down payments change slightly.  First, unlike units of 4 or less, you do not need to plan on residing in the building to use CMHC. The minimum down payment will then be 15% for an insured CMHC loan.

However, it is 15% of the economic value and not of the price sold. The economic value is determined based on actual income and actual and estimated expenses. The location of the building will also have an impact. In addition, it is important to note that even though the minimum payment is 15%, the buyer must still have 25% of the value of the building in net assets. Net assets include the down payment, investments, equity on your other properties…


And to avoid CMHC fees in multiplexes?

If you would prefer to avoid CMHC fees then you must have a down payment of 25%.


You now know all there is to know about down payments!

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