New Down Payment Rules Clarified.
It was just over three months ago that Federal Finance Minister Bill Morneau announced a change to the requirements for government-insured mortgages.
The change took place Monday, February 15th. Let’s take a look at what it all means.
Up until Monday, first-time home buyers buying a home under $1 million could qualify for mortgage insurance backed by the federal government with as little as a 5% down payment.
As of Monday, first-time home buyers buying a home between $500,000 and $1 million will need to have 10% down on the amount above $500,000 in order to qualify for an insured mortgage.
While this may sound dramatic, in actual fact the impact is not that drastic. Let’s look at an example. Before the change, the down payment for a $750,000 property would have been $37,500. Now it’s $50,000 or a difference of $12,500. I get that it will take folks longer to save up, but it’s not a huge difference.
The change is expected to impact no more than 4% of buyers. Buyers of properties under $500,000 haven’t been impacted at all. Buyers of properties over $1 million didn’t qualify for insured mortgages before the change and they still don’t.
So has this fueled the market in anticipation of the change? Certainly 2016 started off strong with January home sales in the GTA up by 8.2% over last year and average sale prices up by 14.1%.
Let’s break it down. In January 43% of sales were of homes between $500,000 and $1 million. But when you look at the total number of homes sold from January to December 2015, 43% of those were between $500,000 and $1 million. In other words, it doesn’t look like those buyers who would most be affected rushed to get into the market before the February 15 deadline.
It appears that the strong January market was a reflection of the continued shortage of 'for sale' inventory combined with strong intent to buy.
The change took place Monday, February 15th. Let’s take a look at what it all means.
Up until Monday, first-time home buyers buying a home under $1 million could qualify for mortgage insurance backed by the federal government with as little as a 5% down payment.
As of Monday, first-time home buyers buying a home between $500,000 and $1 million will need to have 10% down on the amount above $500,000 in order to qualify for an insured mortgage.
While this may sound dramatic, in actual fact the impact is not that drastic. Let’s look at an example. Before the change, the down payment for a $750,000 property would have been $37,500. Now it’s $50,000 or a difference of $12,500. I get that it will take folks longer to save up, but it’s not a huge difference.
The change is expected to impact no more than 4% of buyers. Buyers of properties under $500,000 haven’t been impacted at all. Buyers of properties over $1 million didn’t qualify for insured mortgages before the change and they still don’t.
So has this fueled the market in anticipation of the change? Certainly 2016 started off strong with January home sales in the GTA up by 8.2% over last year and average sale prices up by 14.1%.
Let’s break it down. In January 43% of sales were of homes between $500,000 and $1 million. But when you look at the total number of homes sold from January to December 2015, 43% of those were between $500,000 and $1 million. In other words, it doesn’t look like those buyers who would most be affected rushed to get into the market before the February 15 deadline.
It appears that the strong January market was a reflection of the continued shortage of 'for sale' inventory combined with strong intent to buy.
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