On December 11, 2015 the Finance Minister Bill Morneau announced that the minimum down payment for new insured mortgages would increase from 5% to 10% for the portion above $500,000.
Since then there has been much confusion about who is affected, how the new downpayment is calculated and what it looks like. For this reason we put together a quick video to explain how it all works!
So How Does This Work?
Let's say you purchase a property of $700,000 - when the new rules take affect you will pay 5% of the $500,000 ($25,000) plus 10% of the remaining $200,000 ($20,000) which gives you a total downpayment required of $45,000. This in turn reflects a change of $10,000 over the current rules.
Why Is The Government Making These Changes?
The move is aimed at cooling overheated housing markets in Toronto and Vancouver but that could risk exaggerating a home price correction in the Prairies. With the Finance minister stating:
“We’re not talking about bubbles here. We are talking about ensuring that Canadians take the right approach to investing in a home. It’s to protect the market for the existing home owners and it’s to protect new home buyers as well so that they have the appropriate amount of equity in their home”
— Finance Minister Bill Morneau
So what are your thoughts on the recent changes? Do you think it will affect you or anyone you know?
Please feel free to contact me at any time about more details about the current changes and how they might affect you.