Mortgages

New Canadian mortgage rules take effect in 2016

Will the new mortgage rules affect you?

The federal government is boosting the minimum down payment for higher-priced homes in Canada effective in the new year. The announcement was made by Finance Minister, Bill Morneau at a press conference in Ottawa this past Friday. The increase is part of a “three-pronged approach” designed to curb mortgage fraud and slow rising levels of household debt.

Currently the minimum down payment for all homebuyers when purchasing a home under $1,000,000 is 5%. All mortgages that are less than 20% down are required to have High Ratio Insurance (Canada Mortgage and Housing Corporation Insurance, Genworth or Canada Guarantee).  This is mandated protection for the lenders when providing a mortgage greater than 80% of the home’s value.   This all changes effective February 15, 2016 when the required down payment on homes valued over $500,000 will rise to 10% from 5% on the amount over $500,000.  

So, what does this mean.  Once the new rules are implemented on the 15th of February 2016, someone looking to purchase a $750,000 home would be required to have a down payment of at least $50,000.  Example: Based on the $750,000 purchase price the calculation would be as follows:  5% of $500,000 = $25,000 and 10% of the remaining $250,000 = $25,000 for a total of $50,000.

Down payment rules for mortgages on properties selling at $500,000 or less will be unchanged.

In addition to the higher down payment requirements there will be higher securitization fees and larger capital requirements for lenders.

The new rules represent the greatest change to the housing finance market since 2012. However, unlike past changes that have been aimed at the entire Canadian housing sector, the Liberal government indicated the new rules, which affect higher-priced properties, are mainly targeted at the most expensive markets, particularly Toronto and Vancouver. The Department of Finance has provided information on the upcoming changes in these FAQs on their website.

If you have been on the fence about investing in a new home, now may be the time to move forward. Qualified borrowers who get approved before February 15, 2016, can still buy with only 5% down. But lenders will likely set their application submission deadlines 1-2 weeks earlier.

It is important to note that you do not have to be a first time home buyer to utilize the high ratio insurance – meaning, you can put less than 20% down if you’ve already purchased a home in the past…

If you have been on the fence about investing in a new home or property, now may be the time to move forward.  Qualified borrowers who get their mortgage financing approved before February 15, 2016, can still buy with only 5% down. But lenders will likely set their application submission deadlines 1-2 weeks earlier.

Interested in getting your mortgage approved before these changes take effect?

Contact your Kelowna Mortgage Broker to make an appointment today!

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JOHN ANTLE MORTGAGES – KELOWNA’S MORTGAGE SPECIALIST

We specialise in offering mortgage solutions that go ‘above and ‘beyond the bank’. This means we are able to provide flexible solutions at great rates, often better than what traditional banks have to offer. Working with a mortgage broker can open up your options, allow for potentially greater solutions for your situation.  We work with a variety clients including first-time buyers, those looking to transition from renting to owning, self-employed business people, as well as investors in rental and/or vacation properties.

For more information and to learn more about the mortgage solutions we have to offer, please click here or call us direct (250) 212-8512 or toll free 1 (877) 366-3487.

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