New Down Payment Rules For Mortgages with Government-Backed Insurance

This past Friday the 11th of December, 2015 the Department of Finance made an announcement in Ottawa relating to changes they plan to implement surrounding the down payment rules for mortgages that carry government-backed insurance. You can see the official announcement on the Department of Finance's website: 



What You Need To Know About Mortgages: Essentially in the mortgage world there are 2 types of mortgages out there, the "Conventional" mortgage and the "High-Ratio" mortgage. The difference between them being mainly the size of down payment that you are bringing to the table. A "Conventional" mortgage is for when you plan to bring 20% or higher for your down payment and a "High-Ratio" mortgage is for when you plan to bring less than 20% for your down payment.

This announcement only really directly affects High-Ratio mortgages as it is a requirement for federally regulated lenders to obtain mortgage insurance when the down payment is less than 20 per cent of the purchase price of a property. The largest provider of mortgage insurance is Canada Mortgage and Housing Corporation (CMHC) who also happens to be a crown corporation owned by the Federal Government.

So Conventional mortgages should be unaffected by these changes (but as of right now it is unclear if individual lenders will opt to adopt a similar policy).

What Is The New Policy: For new insured (High-Ratio) mortgages the minimum down payment increases from 5 per cent to 10 per cent on the portion of the house price above $500,000. This policy does not change the 5 per cent minimum down payment for properties up to $500,000.

When Does It Take Effect: February 15th, 2016. 

How Does This Affect Home Buying In Regina: Well in short, it doesn't really. According to the most current information supplied by the Sask MLS System, as of Dec 16th, 2015 there are 1,111 active residential listings on the market (in the city proper). Of those active residential listings, only 113 or 10.17% of them are priced over $500,000.

So the majority of home buyers in the Regina market will be unaffected by these changes. However if you are that upper end buyer or the 1 in 10 that is shopping over $500,000 you will need to make sure you have extra cash on hand to bump up your down payment. If this is you, reach out to a good REALTOR and they will be able to help you out with these calculations. 

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Noel Geremia

Noel Geremia

Associate Broker
CENTURY 21 Dome Realty Inc.
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