The new Liberal government is making changes to cool down the hot real estate market that is prevalent in Canada’s largest cities. As of February 15, 2016 you will be required to put down a larger down payment on any home you purchase for more than $500,000. They have not made any changes to the requirements for purchases of under $500,000.
This requirement for all new mortgages will only be on the portion of the purchase that is in excess of $500,000. This means if you buy a house for $600,000 you would be required to put down 5% on the first $500,000 and 10% on the remaining $100,000. So your minimum down payment would be $25,000 (5% of $500k) + $10,000 (10% of $100k) = $35,000. In comparison under the current rules it would just be (5% of $600k) $30,000.
Canada’s new Finance Minister Bill Morneau rejected talks of a ‘housing bubble’ and said “The Government’s role in housing is to set and maintain a framework that is equitable, stable and sustainable. The actions taken today prudently address emerging vulnerabilities in certain housing markets”. He went on to say “This measure will increase homeowner equity, which plays a key role in maintaining a stable and secure housing market and economy over the long term”.
While this sounds like a big change, it will impact less than 5% of home sales in Toronto and even less in Durham Region. Most people purchasing a home for more than half a million dollars already have a down payment larger than what is necessary under the new requirements. If you are looking to purchase a new home for more than $500,000 and the new down payment rules are an issue for you, then it might be time to get shopping now.
For more information on this or any real estate topics, or if we can help you in any way, don’t hesitate to call us at 905-556-0566.