New Down Payment Rules To Come

If you are looking to purchase a property between the price range of $500,000 to $1,000,000, then this info is for you. As of February 15th, 2016 the minimum down payment for new insured mortgages will be changing (An insured mortgage is a mortgage where the buyer has less than 20% down payment). This new rule will increase the down payment required for purchases over $500,000 to 10% ( instead of the previous 5%). The minimum down payment required for purchases under $500,000 still remains at 5%. Homes priced over the $1,000,000 mark require a minimum of 20% down.

What kind of impact this will have on the Toronto Real Estate Market is hard to say although it should deter those who are teetering on the cusp of not being able to afford a home in that price bracket as many first time home buyers are already overextended. As it stands,  18% of home buyers get help from the bank of Mom and Dad.* In terms of cooling the current hot market – I think Ottawa better come up with another plan. I see the impact of this new rule on the Toronto Real Estate market being inconsequential.

Here’s how the new down payment rules work:

With a purchase price of $750,000, under the new rules you would be required to come up with a $50,000 down payment.  5% or $25,000 on the first $500,000 and then an additional 10%  or $25,000 on the next $250,000.

Now, if you have already purchased a home over $500,000 ( or plan to before Feb 15, 2016) then these new rules won’t apply to you as long as the deal closes before July 1, 2016.

*Waiting to see if new mortgage rules will pop a bubble or prevent one: Don Pittis”, CBC.ca, Dec 13, 2015

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