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With home prices inflating at a much higher rate than income, many Canadians struggle to become homeowners. The impact of the spike in housing is most significant in Canada’s major cities such as Toronto and Vancouver, where the average home cost is closer to $1,000,000. In this article, we delve into what it takes to get a mortgage for a million-dollar home in Canada, from interest rates to income requirements, so you can start planning today. 

Can You Afford A Mortgage For A Million Dollar Home?

If you’d like to purchase a million-dollar home, here’s are some of the requirements you’ll need to meet: 

Home Price$1,000,000
Required Down Payment20% ($200,000)
Mortgage Amount$800,000
Monthly Mortgage Payment$5,353.75*
Minimum Income Requirement~ $170,000
Max Debt-Service-Ratio– 39% GDS- 44% TDS
*assumes a 6.490% interest rate and 25-year amortization period.

How Much Income Do You Need To Get A Mortgage For A Million Dollar Home?

Every mortgage lender in Canada has specific requirements to provide a million-dollar mortgage, and for good reason. Such a large sum of loaned money naturally has higher payments due to the sheer size of the loan. As such, the borrower’s income level is a major consideration as it lets the lender know if you can feasibly repay the debt. 

While every mortgage lender will have different requirements, you can expect your mortgage lender to have a minimum income level requirement of $170,000. Because of these standards, many $1,000,000 mortgages are cosigned by two or more individuals. By combining savings, ensuring solid credit for all parties, and maintaining a strong career, a million-dollar mortgage is possible.

Debt Service Ratio Requirements For A Million Dollar Home

Banks also consider the debt-to-income ratio, meaning they check your earnings in relation to your current debts to make sure that you have enough income to pay the mortgage bill and your other debts. 

  • GDS Ratio – To qualify for a million dollar mortgage, your total monthly housing costs must not make up more than 39% of your monthly gross income. 
  • TDS Ratio – To qualify for a million dollar mortgage, your total monthly housing costs and other debts must not make up more than 44% of your monthly gross income. 

Assuming you take out a mortgage for a dollar home, here’s the maximum you can spend in each category if you have the minimum income of $170,000.

  • GSD – $66,300 a year or $5,525 a month.
  • TDS – $74,800 a year or $6,233 a month.

How Much Of A Down Payment Do You Need For A Million Dollar Home?

According to the Canada Mortgage Housing Corporation (CMHC), mortgage loan insurance is not available for houses worth $1,000,000 or more. As such, when a home is worth $1,000,000 or more, the requisite down payment is 20% of the home value ($200,000). 

While this represents the minimum amount you can put down, it is not the maximum. Higher down payments drastically reduce the total cost of the loan, because you’re borrowing less and therefore will pay less interest. 

Minimum Down Payment By House Value

  • Less than $500,000 – 5% 
  • $500,000 – less than $1,000,000 – Properties worth more than $500,000 require a 5% down payment on the first $500,000; and at least 10% of the remainder. 
  • $1,000,000 or more – 20% 

Can You Get Mortgage Default Insurance On A Million Dollar Home?

Mortgage default insurance protects the bank in the event the homeowner defaults. Any home with a down payment of less than 20% is considered a high-ratio mortgage. All mortgages that fall into this category require mortgage default insurance. There are three companies in Canada that can offer this insurance, The Canada Mortgage and Housing Corporation (CMHC), Genworth Financial, and Canada Guaranty

Million-dollar homes differ significantly because mortgage default insurance is not available for homes valued over $999,999. Any consumer in Canada looking to purchase a house that is worth one million or more must provide at least a 20% down payment.

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Where Can You Get A Mortgage For A Million Dollar Home In Canada? 

Qualifying for a mortgage for a million-dollar home can be difficult. Using a mortgage broker like Mortgage Maestro can help you find multiple lenders you do qualify with. They’re partnered with several different lenders, so you’re sure to get multiple offers, which you can compare and choose from. 

Moreover, they offer unbiased advice and can offer custom mortgage products that meet your needs. 

What Will Your $1 Million Mortgage Monthly Payment In Canada Be Like? 

To get a picture of what you would pay on a million-dollar mortgage, it’s important to consider the interest rate and payment frequency. Both these factors can influence your mortgage payments. 

Mortgages with fixed interest rates tend to be slightly higher, though they also have less risk than a variable-rate mortgage. Generally, mortgages with a shorter amortization period will have lower rates, but higher payments. 

The following table represents the approximate payment amounts for a $1,000,000 home with a down payment of $200,000 (required for million-dollar homes) with a term of five years. 

It shows what you can expect to pay for bi-weekly or monthly payments with two common interest rates: 2.5% and 3.0%.

Amortization Period2.5% interest, biweekly payment2.5% interest, monthly payment3.0% interest, biweekly payment3.0% interest, monthly payment
10-years$3,477$7,537$3,560$7,718
15-years$2,459$5,329$2,545$5,518
25-years$1,653$3,584$1,746$3,786

How Much Interest Would You Pay On A Mortgage For A Million Dollar Home?

The amount of interest you pay on a $1,000,000 house depends on the interest rate, payment frequency and term length. In general, the longer you have a mortgage, the lower your monthly payments, but the more you pay in interest over time. 

Assuming you place a 20% downpayment on a $1,000,000 house and make monthly payments, the following shows what you can expect to pay in total interest before you own the home free and clear. 

Interest rate15-Year Amortization: Total Interest Paid25-Year Amortization: Total Interest Paid
1.5%$93,568$159,321
2.0%$126,103$216,283
2.5%$159,301$275,119
3.0%$193,151$335,789
3.5%$227,646$398,249

Can You Qualify For The First-Time Home Buyer Incentive With A $1,000,000 Mortgage?

Note: The First-Time Home Buyer Incentive has been discontinued. To learn more, click here.

If you’re a first-time homebuyer, Canada has many incentives to assist you in entering the residential real estate market. The First-Time Home Buyer Incentive is a program that offers 5%-10% of the home’s down payment. 

To qualify for the First-Time Home Buyer program, participants’ yearly income cannot exceed $120,000 or $150,000 in the Toronto, Vancouver, or Victoria Census Metropolitan Areas. The program only accepts a total borrowing amount of four times the qualifying yearly earnings or 4.5 times in Toronto, Vancouver, and Victoria. That means the incentive does not apply to any property greater than $480,000 (or $675,000 if you reside in Toronto, Vancouver or Victoria). Those purchasing a million-dollar home, even if the purchase is split between multiple parties, are not accommodated in this program. 

Final Notes

The housing prices continue on an upward trend; and, even if they cool, the million-dollar mortgage is likely to remain. Some larger families choose to cohabitate, where each member co-signs the mortgage and contributes to a downpayment. In other situations, the source of down payments comes from a previous home sale or an inheritance. The average income these mortgages require is more than double the national median salary. Unless you already own assets with a comparable value, getting approval for a million-dollar home can be a challenge. 

Those who can afford this type of mortgage can consider paying a larger down payment to reduce the overall interest paid on the property. Finally, don’t forget to consider factors such as property tax and closing costs when looking to purchase a million-dollar home. 

Million Dollar Home Mortgage FAQs

What’s the average price of a house in Canada?

As of May 2023, the average cost of a home in Canada is $729,044. 

How much can you put down on a million-dollar home?

Since mortgage default insurance is not available for homes valued at a million or more, you’ll need to put down at least 20%.

How much can I expect to pay for closing costs for a million dollar mortgage?

Closing costs generally costs at least 1.5%, but can go as high as 5% of the home purchase price. That means you’ll need at least $15,000 to $50,000 for closing costs. 
Corrina Murdoch avatar on Loans Canada
Corrina Murdoch

Corrina Murdoch has been a dedicated freelance writer and editor for several years. With an academic background in the sciences and a penchant for mathematics, she seeks to provide readers with accurate, reliable information on important topics. Working as a print journalist for several years, Corrina expanded her reach into the digital sphere to help more people gain insight into the realm of finances. When she's not writing, you can find Corrina swimming and spending time with family.

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