Despite the fact that I am a little late to the party with this post, I would like to take the time and explain to my clients and readers what the new mortgage rules entail and how they will affect YOU.
On Friday December 11th our Finance Minister Bill Morneau announced that commencing February 2016 your minimum down payment on a home over $500,000 up to $1,000,000 will be increasing. To put this into perspective, if you are buying a residential property today, CMHC will insure a residential mortgage with a down payment as little as 5%. As of February, purchasers will be require to put down a further 10% down payment on the portion of the home price over $500,000. The minimum of 5% will still apply to the portion below $500,000.
Lets take a look at an example for more clarity. Lets assume you are shopping for a Toronto home priced at $800,000 (townhouse most likely, given the current market trends).
Down payment required today:
5% of $800,000 = $40,000
Down payment required as of February 2016:
5% of $500,000 = $25,000
10% of $300,000 = $30,000
As you can observe in the example above, the increase in the required down payment is $15,000. This may be significant to some, insignificant to others but this will without a doubt have a positive effect on the housing market overall and may help cool the unprecedented growth of the freehold sector.
More importantly, I expect this change to further increase demand and interest in the condominium market and will encourage appreciation for condominiums priced below $500,000.
Merry Christmas and Happy New Year Everyone, see you in 2016!