December 11, 2015

New downpayment requirement for Government insured Mortgages

The Liberal government, made it official today with a stepped increase in the downpayment requirement for government back mortgages.

New Government Insured mortgage downpayment requirements coming to Canada on February 15, 2016. It’s still 5% minimum downpayment on homes under $500,000, while homes priced above will have a stepped downpayment, with the first $500,000 requiring a minimum of 5% down, while the balance will require 10% down.
Example 1: $700,000
First $500,000 -> 5%, or $25,000
Next $200,000 -> 10% or $20,000
Total Down payment requirement= $45,000 (6.428%) [$10,000 more required for a downpayment than the current 5% Current minimum Downpayment of $35,000]

Example 2: $900,000
First $500,000 -> 5%, or $25,000
Next $400,000 -> 10% or $40,000
Total Down payment requirement= $65,000 (7.22%) [$20,000 more required for a downpayment than the current 5% Current minimum Downpayment of $45,000]

The Government downpayment requirement for homes over $1m remains unchanged at 20% downpayment required for Government Insured Mortgages.

I welcome this as it means more equity is required to get into the market, and therefore allows more cushion should things go slightly backwards. It’s important to recognize this as equity in the housing market. A strong real estate market is one built with equity, not debt.

Posted by at 6:36 AM

0 comments

Posted in buyers

Read more

December 7, 2015

New Down payment guidelines may be in the works

down payment_10percent

New Down payment requirements in the works?

I received this interesting email from one of my favorite mortgage brokers, Mike Havery (aka The Mortgage Architect), this weekend about some potential changes coming to the mortgage markets to help curb a run on house prices to ensure home owners have some equity in their homes after buying.

It goes a little something like this:

Good afternoon Darcy,

Quite  an interesting week of mortgage news with 2 items of interest:

1. The Bank of Canada held steady on interest rates citing jobs and inflation data. Rates continue to remain low of edging up slightly and I belive the bank will continue to keep rates where they are until the employment picture improves

2) Originally reported by Canadian Mortgage Trends — citing a “high-level lender source connected to the DoF, who declined to be identified” – the Department reportedly may recommend a graduated down payment scale that could be structured like this:

  • Homes costing $0 to $500,000 would require at least 5% down
  • Homes costing $501,000 to $700,000 would requires at least 7% down
  • Homes over $700,000 would require 10% down

When reached for comment, the Department of Finance said it does not comment or speculate on possible policy actions, or discuss anything that might be under consideration.

I believe the increase in down payment has a high probability of happening given it was leaked to numerous sources. While it may impact certain buyers, the majority of home I mortgage over $500,000 already meet the new recommended guidelines

All the best,

Mike Havery,
403-836-7100

 

however, my key take away is this: Ultimately the potential changes are designed to effect those in the red hot markets of Toronto and Vancouver, as entry level prices are slightly above $500,000. Smaller markets, where housing prices actually seem affordable should not be as affected…

If you are buying a house for over $700,000 and don’t have $70,000 (or 10% of the purchase price) for a downpayment, you probably should not be buying a $700,000 home. If the price is exactly $700,000, this means an additional $35,000 would be required compared to the current requirement of 5% down.

The housing market is very delicate, and is vastly different from town to town, city to city, and province to province, but a housing market where home owners are encouraged to have actual equity in their home, rather than hope that the market goes up 5%/year, is a good thing in my mind, and any disruptions to the market that may come from this would likely only be temporary.

For questions for Mike Havery, you can reach him directly at 403-836-7100, or visit: http://www.themortgagearchitect.ca

(Side note: current mortgage requirements (depending on the lender), require investment properties and second homes to have a 20% down payment.)

Posted by at 6:36 AM

0 comments

Posted in buyers ,market-data ,uncategorized

Read more