12 Dec New Mortgage Rule is Great News for Condo Investors
Finance Minister Bill Morneau announced changes to the rules for government-backed mortgage insurance(CMHC insured). Effective February 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.
Government is tightening mortgage rules, which are clearly aimed at slowing down the Toronto and Vancouver housing markets.
House prices are just completely out of reach now for the majority of buyers and they are giving up and shifting their focus on the condo market. This increase in demand is driving prices higher.
Side effect of this rule is very welcome effect on Condo investors. This clearly means that government want to decrease the demand of homes above $500,000 and increases the demand for homes below $500,000 the prices. This will definitely push the demand hence prices for condos. And houses just became more unaffordable for first time buyers with this new mortgage rule.
A sliding scale will be used which gradually increases the minimum down payment from 5% for a $500,000 purchase price, moving up to 7.5% for purchase price of $999,999.
For Example: A $600,000 home now require $35,000 down payment —
5% for the first $500,000 = $25,000
10% for remaining $100,000 = $10,000
Below is the downpayment requirement between $500K to $999K.
Minimum down on $500K = $25K (5.0%)
Minimum down on $600K = $35K (5.8%)
Minimum down on $700K = $45K (6.4%)
Minimum down on $800K = $55K (6.9%)
Minimum down on $900K = $65K (7.2%)
Minimum down on $999K = $75K (7.5%)
Minimum down on $1M = $200K (20%)
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