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Tightened Rules on Mortgages

The federal government is boosting the minimum down payment for higher-priced homes in Canada effective in the new year.


Finance Minister Bill Morneau announced that homebuyers are currently required to put down a minimum of 5% for the portion up to $500,000 to qualify for Canada Mortgage and Housing Corporation (CMHC) insurance — protection that lenders insist on when providing a mortgage worth more than 80 per cent of the home's value.


As of February 15, 2016, CMHC will require a 10% downpayment on the portion of any mortgage it insures over $500,000.  For instance, if someone is looking to buy a $750,000 home would need to have a minimum down payment of $50,000, which is what you get when you add five per cent of $500,000 and 10 per cent of the remaining $250,000.


Banks are forbidden to provide "high-ratio" mortgages — when the amount being borrowed is more than 80 per cent of the home's purchase price — without taking out insurance for it


The new rule doesn’t affect properties over $1 million because they don’t qualify for high-ratio mortgage insurance.

 

This post is directly copied from  CBC and Canadian Mortgage Trends


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