Down payment increase takes effect this week

THINK OUTSIDE THE BOX:  Beginning on February 15th, insurers will require a 10% down payment on the portion of any mortgage over $500,000. The five per cent rule remains the same for the portion under $500,000. This means someone looking to buy a $750,000 home would need to have a minimum down payment of $50,000 (which is five per cent of $500,000, plus 10 per cent of the remaining $250,000).

After its announcement in December, the federal government’s latest revisions to mortgage regulations are set to take effect beginning this week, raising concerns of homes moving ever out of reach of an increasing number of households.

Prospective buyers would be obligated by mortgage insurers—including the CMHC, a top choice for most Canadians—to pay a 10 % down payment on any mortgage valued between $500,000 and $999,000.

Analysts said that the hike would prevent a significant fraction of the buying population, especially young families, from participating in Canada’s surging real estate markets. Sales volume for single-family detached homes in high-demand areas like Toronto and Vancouver might bear the brunt of the effects.

“The majority of the impact is going to be on first-time homebuyers, particularly first-time buyers in the hotter markets,” Real Estate Investment Network senior analyst Don Campbell told CBC News.

Government officials said that while this increases the burden on first-time buyers, the adjustment would actually give financially struggling home owners second thoughts and save them from insolvency, particularly in the context of continuously growing property prices and a weak economy.

“We want to make sure we create an environment that protects the people buying homes so they have sufficient equity in their home,” Finance Minister Bill Morneau said back in December.

Ephraim Vecina      Mortgagebrokernews.ca      February 16, 2016

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