Canadian Mortgage Downpayment Increase Announced Today
Big news from Canada’s finance minister! Today, Finance Minister Bill Morneau announced that the required down payment on homes worth over $500,000 will rise from 5% to 10% starting February 15th, 2016. This is in order to to qualify for Canada Mortgage and Housing Corporation (CMHC) insurance. Lenders usually require this insurance when they provide a mortgage worth more than 80% of the home’s value.
It is attempting to maintain a stable housing market. Benjamin Tal, deputy chief economist at Canadian Imperial Bank of Commerce believes increasing the down payments will cool the Toronto market but that the “impact will be smaller than perceived”.
What this means for you:
– The ruling will only apply to the portion above $500,000, so if you are buying a home for $900,000, you will need to put a minimum of 5% on the first $500,000 ($25,000) and 10% for the remaining $400,000 ($40,000) for a total of $65,000. Homes above $1,000,000 will still require a 20% down payment.
– The new ruling takes effect in February so the typically slow months of December and January are going to be much busier than usual.
– It only applies to new purchases so if you are renewing a mortgage and only have 5% in equity, you will not be affected.
– If you were thinking of selling in the spring, now might be a good time to sell. If you have questions about the changes or the market, drop me a line, I’d love to help!
Image: Adrian Wyld/Canadian Press