Toronto, ON -- (SBWIRE) -- 03/03/2016 -- New mortgage rules are now in effect for all Canadians. As of Monday February 15th 2016, all Canadians must now provide a larger down payment if they purchase a home listed above $500,000. The Mortgage Broker Store, which serves Toronto condo and property owners, is now helping clients to meet new mortgage and down payment rules.
"These new mortgage rules are mostly for people buying property in the country's hottest markets, like Vancouver and Toronto," says Ron Alphonso, president of the Mortgage Broker Store. "Smaller cities don't have many homes in this price range. In Toronto, it's easy to pay more than half a million dollars for a home."
Federal Finance Minister Bill Morneau first announced the changes back in December 2015. Previously, a 5 per cent down payment was required on all homes valued up to $1 million dollars. Since February 15th 2016, all banks and lenders must require a larger down payment for homes worth between $500,000 and $1 million dollars.
The minimum down payment is still set at 5 per cent for amounts up to $500,000, but a new 10 per cent down payment is required for the portion ranging from $500,000 to $1 million dollars.
Down payment rules for homes listed over $1 million dollars remain unchanged with a mandatory 20 per cent down.
When asked for his thoughts on the effect of the new regulations, Alphonso said: "I don't see it having a huge effect on the Toronto real estate market." When asked why, he gave the following explanation: "In Toronto, condos are a common entry point into the real estate market. They are often the only option first-time homeowners can afford. Since many condos are still available for less than $500,000, the new rules don't apply. Most people looking at listings closer to the $1 million dollar mark are already homeowners. Their current homes have likely increased in value, which means they should already have the funds for the larger down payment."
When buying a home with less than 20 per cent down, lenders require buyers to purchase Canada Mortgage and Housing Corporation (CMHC) insurance. Adherence to the new mortgage rule is necessary to qualify for CMHC insurance. This insurance provides lenders with an important layer of protection against delinquent mortgages. That means a potential homebuyer who can't come up with the extra down payment money will be refused his or her mortgage, and won't be able to enter the housing market.
"One worry is that the larger down payment amount will encourage people to get creative," says Alphonso. "Some won't want to pass on their dream house – instead, they'll look for creative ways to come up with the cash. Credit cards, cash advances, loan sharks… the possibilities are scary."
For more information on down payments and mortgages, please contact the Mortgage Broker Store at 416-639-0786 or visit their site at www.mortgagebrokerstore.com
Contact:
Ronald Alphonso
Mortgage Broker Store
License #: M11001286
Address: 100 Consilium Pl. Suite 200, Toronto, ON, M1H 3E3, Canada
Phone: 416-639-0786
Email: ron@mortgagebrokerstore.com