Bill Morneau tightens mortgage rules on homes over $500K
February 11 2016 Posted by Tracy Bennett
DEPARTMENT OF FINANCE-OTTAWA, ON
Effective February 15th, all purchase over $500,000 will be subject to 10% down. The portion up to the 500K can be 5%. This means that for a 600K purchase you will pay:
500K X 5% = $25,000 and 100k X 10% = $10,000 for a total downpayment of $35,000
$600,000 house price
$ 35,000 downpayment
$565,000 mortgage amount
$ 20,340 CMHC premium @ 3.6%
$585,340 total mortgage amount
Since the $565,340 is only 94.17% of the purchase price you will pay only 3.6% insurance premium added to the mortgage.
It doesn’t drastically affect the down payment; it is a graduated approach and only affects new purchases after February 15th, 2016.
More details on the attached link: http://www.fin.gc.ca/n15/15-088-eng.asp
- Federally regulated lenders are required to obtain mortgage insurance when the down payment is less than 20 percent of the purchase price of a property.
- Properties valued at $1 million and above require a minimum down payment of 20 percent.
- The average price of homes sold in October 2015 through the Canadian Real Estate Association’s Multiple Listing Service® (MLS) system was about $453,000.
- Insured homebuyers typically purchase lower-priced properties than the overall average. In 2014, the average property price for new insured purchases with down payments of less than 20 percent was about $293,000, compared to an average price of about $416,000 for properties sold through the MLS system.
Any questions or to review your downpayment requirement, contact us!