18 Aug 2016
New Mortgage Rules and Their Impact
A short time ago Canada Mortgage and Housing Corporation (CMHC) changed the rules on how much down payment buyers have to have in place to buy a home worth more than $500,000. The new rules stated that you have to have 5% on the first $500,000 and 10% on the remaining balance up to $999,999. After that point they require 20% but that’s another article altogether.
With the recent changes, they also allowed for the use of 100% offset should the home have a legal suite. This was great news for some parts of the country as housing costs increased over the million dollars in prices in Vancouver and Toronto. Does it have much effect on other parts of the country?
Recent numbers would say no. With housing prices in the west decreasing just about everywhere else but Vancouver, the average Canadian first time buyer will not likely apply for a mortgage that is in this price range. The idea of wanting the big home as the first home is something that first time buyers will not be doing. Even in the Vancouver markets, the buyer for the million plus property is most likely a move up buyer.
I look at my own nephews and nieces and they have bought closer to their lifestyles. My niece in Vancouver, who is a single young professional, chose more the loft style home and while living in 400 sq ft. is foreign to most of us, it is a choice she had to make to be in downtown Vancouver and able to walk to work.
Probably where we have seen the biggest impact of these new rules is in Ft McMurray, AB. While prices are down in Ft McMurray, there are still a lot of homes that are in the $850,000 to $900,000 range – most built during the boom times with full legal suites.
I recently had a file that was in the $900,000 price range with a full legal suite. While the clients had the required down payment of 5% and 10% on the balance of the mortgage, the lender decided they wanted 20% down on the property even though CMHC had said yes to the mortgage. I’m sure this is happening in more than one location across Canada especially in areas where the prices have been fluctuating up and down over the last few years.
With ever changing markets and regulations, be sure to get advice from your Dominion Lending Centres mortgage professional before you buy your dream home.