New Mortgage Rules Have Kicked In For Canadians
The following is a guest post by Rate Hub.
If your family is looking to buy a home, you may need to save a bit more for a down payment because the government has tightened mortgage rules.
The down payment required on properties costing more than $500,000 and less than $1 million has increased as of Feb. 15. For the first $500,000, the down payment of 5% remains the same but there’s now a 10% minimum down payment on the portion of the price over $500,000.
For example, if you’re looking at purchasing a $600,000 home, you’ll have to make a down payment of 5% on the first $500,000 ($25,000) and 10% on the remaining $100,000 ($10,000). That’s a total of $35,000 or 7.2% of the total purchase price. Before Feb. 15, you would’ve only had to put down $30,000.
|Old eligibility rules||New eligibility rules|
|Home purchase price||Minimum down payment percentage||Minimum down payment amount||Minimum down payment percentage||Minimum down payment amount|
|$500,000 and below||5%||up to $25,000||5%||up to $25,000|
|$1,000,000 and above||20%||$200,000 and up||20%||$200,000 and up|
The current 5% minimum down payment for mortgages on homes that are less than $500,000 will stay the same. And if you already have a mortgage, you’re not affected.
The new rule changes were made in an attempt to cool down the housing markets in Toronto and Vancouver where prices have been rising faster than the national average.
These changes will mainly affect young families and millennials trying to buy their first home, especially those who want to buy a house near the downtown area of Vancouver or Toronto.
Those who didn’t rush to purchase a property before the new rule came into effect have one of three options. You’ll now have to either come up with an additional down payment through a gift from their family, wait a bit longer until they’ve saved the amount of money they need, or consider looking for a property under $500,000. If you choose the last option, you’ll probably have to look for a condo or a property that’s a bit further away from where you want to live.
RateHub.ca is a website that compares mortgage rates, credit cards and deposit rates with the goal to empower Canadians to search smarter and save money.