Knowing the new mortgage rules will help you plan the purchase and budget accordingly. So what is the latest?
Mortgage Intelligence: Know The New Mortgage Rules
As part of the new federal rules that took effect on February 15th, Canadians looking to buy homes between $500,000 and $1-million will now be required to put down a larger down payment. Properties over $500,000 and below $1-million now requires a down payment of at least 10 percent of the price of a home.
To put that in dollar terms, let’s take the average price of a home in Toronto for January 2016. According to CREA (National Average Price Map), that average price was $631,092, which would mean a minimum down payment of $38,109, which is what you get when you add five per cent of $500,000 ($25,000) and 10 percent of the remaining $131,092 ($13,109). That would increase the required down payment by $6,555! Not easy to come up with when many new home buyers were already struggling to come up with a down payment.
The new Mortgage Rules, however, will not affect properties under $500,000, in which the five percent rule remains the same. Also, it will not affect properties over $1 million because they don’t qualify for high-ratio mortgage insurance anyway.
This new federal rule will affect about one per cent of the overall Canadian real estate market according to Finance Minister Bill Morneau. Reasons for changes to the rules for government-backed mortgage insurance is to contain risks in the housing market, reduce taxpayer exposure and support long-term stability. To read more information on the new Mortgage Rules, go to Department of Finance News Release.
Now more than ever Canadians need to save money on their Mortgage by comparing mortgage rates and preparing beforehand by using our mortgage calculator. Compare best mortgage rates at CompareMyRates.ca from top mortgage brokers and save.
Image from CMHC Twitter