Homebuyers in Canada now face larger down payment requirements for properties over $500,000. The changes are intended to temper some of Canada’s heated real estate markets. Here are five things to know about the new rules:
Cough up the cash: Homebuyers now have to put at least a down payment of 10 per cent on the portion of the price of a home over $500,000. For anyone buying a home for $700,000 — a common list price in Vancouver and Toronto — that means the minimum down payment will rise to $45,000 from $35,000. Any home under $500,000 still requires only a down payment of five per cent.
Who’s affected: Those shopping for a home above the $500,000 mark. First-time buyers will feel the pinch since they’ll be required to put down bigger down payments to get into the market- especially in markets such as Vancouver and Toronto where real estate prices are high. Those selling their homes in order to size up, especially in cities with hot housing markets, likely won’t feel the pain as much since they’ve built up equity in those properties.
Impact: The influence the new rules will have over house prices is expected to be small, experts say, given their narrow reach. When he announced the changes in December, Finance Minister Bill Morneau said they are expected to affect one per cent or less of the real estate market.
Past measures: Four rounds of changes were made to tighten eligibility rules for new insurable loans between 2008 and 2012. Among them: the minimum down payment was increased to five per cent, the maximum amortization period was reduced to 25 years from 30 years and the maximum insurable house price was limited to below $1 million.
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