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New Mortgage Rules Explained

On Friday, the Federal government announced changes to the minimum down payment rules when buying a home. My quick take: "the changes won't effect most home buyers. For those that it may effect, the changes are minimal."
  • At present, the minimum down payment to buy a home is 5% of the purchase price, for government-backed mortgages.  Anyone who buys real estate with less than 20% down payment is required to have Mortgage Loan Insurance. Buying a home over $1 million dollars requires a minimum down payment of 20%.

  • Effective February 15th, 2016 the minimum down payment rules are changing.  Any purchase price over $500,000 will require a graduated 10% minimum down payment.  The new down payment rule is NOT a 10% minimum down payment on the full price, but only for the portion over $500,000.  If you're buying a home for less than $500,000 there will be no changes to the minimum down payment required.  Of course, this is only a minimum requirement, you can always put more money down.  Buying a home over $1 million dollars will still require a down payment of 20%.
For example: buying a home for $600,000 after February 14th the minimum down payment will 5% on the first $500,000 and 10% on the remaining $100,000. The new total down payment will be $35,000 ($25,000 old rule portion + 10,000 new rule portion).
Most people buying a home over $500,000 are typically putting down more than 5% already, and this new rule will not effect them; especially if they are a move up buyer.  The new rule may effect first time buyers who are buying above $500,000 as they will need to save up more.     
Here is table showing different purchase price and the minimum down payment with the existing and new rules 
If you have any question please call or text me directly 416-565-9955
 
Nazaar Shadir, Broker.

Posted in Real Estate News,Mortgage Interest Rates Posted by Nazaar on December 12th, 2015 — Permalink