New Mortgage Down Payment Rules

December 11, 2015 – Finance Minister Bill Morneau announced new down payment rules in an effort to try and cool the country’s two hottest real estate markets, Toronto and Vancouver.

For properties between $500,000 and $1 million, purchasers applying for an insured mortgage will now need to put up to an additional 2.5% of the purchase price down. Specifically, 5% down will be required on the first $500,000, and 10% down will be required on the next $500,000.
The new down payment rules take effect on February 15, 2016.

This policy increases the minimum down payment from 5 per cent to 10 per cent on the portion of the house price above $500,000. This policy does not change the 5 per cent minimum down payment for properties up to $500,000.

This measure applies only to new insured mortgage loans. Homeowners with an existing insured mortgage or those renewing existing insured mortgages will not be affected by this policy change as mortgage insurance is good for the life of any existing insured mortgage.

The new rule doesn’t affect properties over $1 million because they don’t qualify for high-ratio mortgage insurance.

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Many experts are predicting this new policy is more likely to fuel a rush of buyers before the increased costs kick in, as has happened in the wake of previous efforts to tighten lending rules. It could also fuel more competition for condos and houses under $500,000 among first-time buyers determined to break into the booming market before they are locked out forever.

Also announced, higher securitization fees and larger capital requirements for lenders.
Canada Mortgage and Housing Corporation (CMHC) announced increases to guarantee fees charged to lenders for CMHC-sponsored securitization programs, National Housing Act Mortgage Backed Securities and Canada Mortgage Bonds. The Office of the Superintendent of Financial Institutions (OSFI) has also announced plans to consult on and update regulatory capital requirements for residential mortgages for federally regulated lenders and private mortgage insurers.
Source: Canadian Mortgage Trends | Toronto Star | Business News Network

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