Changes to Mortgage Down Payment Rules

The Canadian government is concerned about the ‘escalating home prices in high-priced markets’ and is making a change to the down payment required for mortgages that are backed by the Canadian government.

The Government of Canada’s Finance Minister Bill Morneau announced on December 11, 2015 that there would be changes to the down payment required when purchasing property.

Morneau said “we recognize that, specifically in the Toronto and Vancouver markets, we have seen house prices that have been elevated, and we want to make sure we create an environment that protects the people buying homes so they have sufficient equity in their home.”

At the moment, homebuyers can finance principal properties at 95%, needing 5% down on purchases under one million dollars. The Finance minister has tightened those rules and has mandated properties between $500,000 and One Million dollars will require a larger down payment. The change could mean having to put down up to an additional 2.50% of the purchase price. Anyone buying property will need 5% down on the first $500,000 and 10% down on any amount over $500,000. What this means, in dollars and cents is, if you purchase a property for $700,000, you will have to come up with an additional $10,000 down; 5% on $500,000 being $25,000 and 10% on $200,000 being $20,000 for a total of $45,000.

Although the new rules won’t be in effect till February 15th, some lenders have set application submission deadlines 7 – 10 days earlier in order to get those applications processed before the deadline. Completion deadline for purchases submitted prior to February 15th is July 1st.

The Canadian Mortgage Professionals, a group who lobbies on behalf of the mortgage industry, opposes the change believing the move will reduce house sales – which is why it opposes the change.  Time will tell if this new rule will do anything to slow the escalating home prices in the higher-priced markets.

This change will have an impact on Fort McMurray’s market but I don’t think it will have a huge impact. Those who haven’t saved enough will continue to save until they do, entering the housing market a little later than they may have anticipated.

Head over to where you’ll find a calculator that will do the down payment calculation based on the new rules. Simply enter the purchase price; the calculator will do everything else.

Barb Pinsent – Mortgage Architects

Ph: 780-370-1490




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