Today a new mortgage rule takes effect. To simplify: Any mortgage over the $500k value requires 10% instead of 5% for a down payment. To be specific, the value over the $500k. The value under the $500k is still 5%. For a quick example:
A house cost $750k. You would pay 5% on the first $500k ($25k) and 10% on the $250k ($25k). Therefore you are paying $50k down paymnent.
See the story below for more details.
Mortgage rules requiring 10% down on Canadian homes over $500K kick in today
Today is the first day you’ll need to put at least 10 per cent down on a home selling for more than $500,000 in Canada.
The new mortgage rules, announced in December by Finance Minister Bill Morneau, are intended to keep housing prices affordable for anyone wishing to enter some of Canada’s hottest real estate markets, such as Toronto and Vancouver.
- Morneau tightens mortgage rules on homes over $500K
- Regulator moves to raise requirements for mortgage lenders
- Are young homeowners doomed if housing prices drop?
Toronto real estate agent Sonya Côté said first-time homebuyers were feeling the pressure to put their five per cent down on homes while they still could.
‘I think it’s a good idea. I’m concerned with the value of properties these days.’– Michael Elmenhoff, Toronto broker
“Coming up with $3,000 or $5,000 or $7,000 more for a down payment to get in there for the first time is a lot of money for first-time buyers,” she said.
The rules change meant Côté was able to sell a row house that hasn’t been renovated, and with no parking, in a week.
“That drove traffic through this place like a circus,” she said of the new changes. “We had 103 showings, 13 offers and it went for $149,000 over asking.”
The agent predicted real estate traffic will slow now with first-time buyers facing stricter regulations.
Will more buyers eye condos?
Toronto broker Michael Elmenhoff told CBC News he supports the change because of the way home prices have been skyrocketing lately.
“I think it’s a good idea. I’m concerned with the value of properties these days,” he said, adding buyers may have to rethink their objectives moving forward.
“I think we’re going to see more pressure on the lower price condos as a result of that.”
People can still put down five per cent for homes $500,000 and under. For example, If you want to buy a $750,000 home, you’ll need to have a minimum down payment of $50,000, which is what you get when you add five per cent of $500,000 and 10 per cent of the remaining $250,000.
“We recognize that, specifically in the Toronto and Vancouver markets, we have seen house prices that have been elevated,” Finance Minister Bill Morneau said last December.
“We’re not talking about bubbles here, we are talking about ensuring that Canadians take the right approach to investing in a home,” he noted.
“We want to make sure we create an environment that protects the people buying homes so they have sufficient equity in their home.”
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Thanks to debtdecipline.com for the pic!