Pat Simmonds Real Estate Services

New Down Payment Changes

Much has been written about the new down payment changes since they were introduced immediately after the recent election in November 2015. The new Finance Minister, Bill Mourneau, hadn’t even warmed his chair such was the speed at which the legislation was delivered.

The reaction from Bay Street to Main Street was equally as swift. Straight away there was confusion about the amounts involved as people rushed to voice their opinions. Once the dust settled it was apparent that the correct analysis was 5% up to $500,000 (as per usual) and then 10% applied to the balance over $500,000. Given that the average price for a detatched home in downtown Toronto is now well over $1,000,000 and the average semi goes for around $750,000 it’s easy to see how this can impact the process. Let’s say a property is being purchased for $850,000. That’s $25,000 plus $35,000 pushing the required down to $60,000. Properties priced over $1,000,000 are subject to a different set of rules but I can see these criteria being altered as average prices creep toward this level.
The average existing homeowner who has already acquired equity through earlier purchases could roll this into the asking price but for the first time buyer it could prove to be a psychological and fiscal barrier. In reality it’s a fairly benign adjustment when all the factors that affect mortgage eligibility are taken into consideration.

Either way the best approach is always to seek professional advice from your mortgage professional and your Realtor. More often than not there are approaches that can be taken that the average consumer may not have thought about or considered. If you are considering remortgaging for an investment property it would be very advisable to consult with an accountant as capital gains and other tax implications come into play.
The first time buyer will no doubt be somewhat put out that once again they’re the ones made to feel the pressure but the reality is such that a dedicated saver can achieve the necessary results that hit the magic mark. They always do.
Remember that changes are all not necessarily a one-way street. The CMHC recently downgraded their rules surrounding rental apartments as part of a home purchase. A buyer can now declare 100% of the rental income from a basement or first floor apartment which has a positive impact on mortgage eligibility. This is great news for the First Time Buyer.

There is further reading at this link:
New Down Payment Changes