New Mortgage Rules
As of Monday 15 February, 2016 the mortgage rules pertaining to down payments have changed across Canada. The new mortgage rules will increase the minimum required down payment for homes between $500,000 – $1,000,000 from the previous 5% across to a minimum of 5% on the first $500,000 of a home and 10% on any additional cost up to $1,000,000. For example, anyone purchasing a home for $700,000 will be expected to put down 5%, or $25,000, for the first $500,000 of the purchase price, and then an additional 10%, or $20,000, for the remaining $200,000 of the purchase price. In other words, the minimum down payment for a $700,000 home will increase from $35,000 to $45,000. Any home under $500,000 will still only require a 5% down payment and homes over $1,000,000 will still require a 20% down payment.
Those primarily affected will be first time home buyers, particularly those in cities such as Vancouver or Toronto where the average home price is considerably higher than many other areas in Canada. Individuals and families looking to sell their homes and upgrade likely won’t be affected as they have, in most cases, already built up the equity in their home. In fact, the impact of these changes will be very small. When the changes were announced in December 2015, the finance minister, Bill Morneau, said that the changes are expected to affect less than 1% of the real estate market. Some analysts were expecting a surge in sales before the new rules took effect. However, while the market has been energetic in the past few weeks this could simply be a result of the mild winter and low mortgage rates and is not necessarily an effect of the anticipation of these new rules.
All in all, these are important changes to take note of and will affect many new home buyers but the changes are not expected to have far reaching effects across the Canadian real estate market. If you have any questions regarding this information, please contact the Tamara or Shannon Stone at email@example.com or 250-862-7675.