New Mortgage Rules That Most Of Us Can Sleep Through

By: Arunan Kuven

New Mortgage Rules That Most Of Us Can Sleep Through

Tags: real estate, mortgage, toronto, gta

In December the Liberal government announced that starting February 15 2016 there will be a few new changes that may affect some buyers who plan on obtaining a new mortgage.

  1. Double the minimum down payment for homes priced from $500,000 to $1-million

  2. An increased fee charged to lenders that securitize government-backed mortgages

  3. A possible new charge that would require lenders to hold more capital against some insured loans in order to reduce mortgage fraud and slow rising levels of household debt


These three rules have were specifically tailored to target the country’s two most expensive markets, Vancouver and Toronto.


Of these changes the most concerning to home buyers is the increase in minimum down payment for properties priced between $500,000 to $1-million. Buyers purchasing a home for under $500,000 will be unaffected by this change but will fall victim as usual to the previously increased CHMC fee of 3.5%, up from the prior 2.5%.


Buyers purchasing a home for over $500,000 are only required to increase their down payment for the amount over $500,000, for example a home purchased at $700,000 would breakdown as follows.


$500,000 x 5% = $25,000
$200,000 x 10% = 20,000

Total required down payment = $45,000


Prior to this change buyers would have a minimum required down payment of $35,000 on a $700,000 purchase. As you can see there’s a difference of $10,000 in our example. These changes won’t affect buyers greatly according to TREB’s Market Year In Review and Outlook Report, only 6% of homes between $500,000 and $700,000 are purchased with less than 10% down and it's even less for homes between $700,000 and $1-million at only 3%.


I’ll keep it simple, will all these changes slow the market? No, because it doesn't affect enough of today's buyers. Will people go into a buying frenzy before the deadline? Probably not, supply is low and finding a house you can call home is a lot harder right now. Is it a good time to sell? Yup! it’s still a seller’s market out there people, with the great weather we’ve had so far buyers haven’t had a need to go into hibernation and instead are out there looking for a place to call home.