New Mortgage Rules
December 14, 2015
The rules for down-payments are changing in 2016. The new mortgage rule is being applied in order to slow down current markets that are hot and already expensive while leaving other markets alone; for the most part!
The New Mortgage Rule:
Starting on February 15th, the new rule will apply to individuals who have a down payment of less than 20% and are looking to purchase a home for more than $500,000. If you have less than 20% for your down payment, you require mortgage default insurance. If you require mortgage default insurance the minimum down payment will rise to 10%. This is an increase from the previous 5% for the portion of a house price that exceeds $500,000.
The good new is that if you do want a house that exceeds $500,000 and if you already have a mortgage or if you have already applied for mortgage insurance before February 15th, these changes will not affect you!
This new rule only affects individuals looking at buying homes between $500,000 and a million dollars. Anyone buying a home over a million dollars is required, by law, to have a minimum down payment of 20% and thus, the Canada Mortgage and Housing Corporation insurance does not apply.
Once implemented, the new mortgage rules will be broken down as follows:
For example, an individual looking to buy a home for $600,000 will require a down payment of $35,000.
For the first $500,000 the 5% down payment applies, which equals $25,000 and the remaining $100,000 requires 10% down which equals $10,000 for a total of $35,000. (0.05 x $500,000) + (0.10 x $100,000) = $35,000 Previously, individuals would have required $30,000 for their downpayment.
To better understand how this will affect you or for more information regarding the new mortgage rules, please refer to the Globe and Mail and the CBC news release.