Minimum Down Payments On Insured Mortgages Going Up.

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Minimum Down Payments On Insured Mortgages Going Up.

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CMHC

This is great news, in my opinion, but ready on to understand why.

Today Finance minister Bill Moreau announced changes to the minimum down payment for insured mortgages:

Effective Feb 15 2016, the minimum down payment for new insured mortgages will increase from 5 per cent to 10 per cent for the portion of the house price above $500,000. The 5 per cent minimum down payment for properties up to $500,000 remains unchanged.

While the increase will undoubtedly have an impact here are some key facts:

  • For properties under $500,000 there is no change to the 5% minimum down payment
  • The increase to 10% only applies to the portion of the property over $500,000
  • As mortgage insurance is not available on properties over $1,000,000 the impact is only on properties valued at $500,000 to $1,000,000. Properties over $1,000,000 still require a minimum down payment of 20%
  • For at least the last year it has been difficult for home buyers to qualify for a mortgage with only 5% down as lenders and insurers have been reluctant to lend except to those with the best qualifications.

So what does this mean?

For one, this will get lots of media attention. The press typically jumps all over these reports.

Secondly, if some people are in the market now for a home above $500K, they will probably move quickly if the down payment is an issue.

Fact is, though, on the average home purchase, there is no real impact, as the increase only applies to the portion ABOVE $500K.

Although it sounds like the new Down Payment is 10%, it’s actually only increasing to a maximum of 7.5%, and that’s only if you are buying a home for $1 Million.

 

 

This to me is actually a good thing, as it reduces the risk for lenders, which essentially protects the market as a whole.

So yet another move, I believe, to make it LOOK LIKE they are tightening the reigns, but no real difference. The numbers will speak for themselves, and I’m watching the market, popcorn in hand.