5 things to know about Canada’s new mortgage rules

Canadians willing to purchase homes between $500,000 and $1mn are now laying down bigger amounts as down payment ever since the new federal rules took effect in February this year.

For properties exceeding $500,000 Canadian homebuyers are now being subjected to larger down-payments. The new changes are likely to agitate some heated real estate markets in Canada.

Here are five things you should know about the new regulations:

Dole out the cash
Homebuyers in Canada now have to lay down a down payment of at least 10 percent on the fraction of the home cost above $500,000. For those purchasing a $700,000-home, a common price range in Toronto and Vancouver - the minimum required down-payment has jumped from $35,000 to $45,000.

Any home pegged under $500,000 still needs a down payment of 5 per cent only while homes over $1 million require a 20 percent down payment.

Who is feeling the heat?
Canadians looking to buy homes in Vancouver and Toronto are the most affected by the new regulations. New home buyers in these two cities are now feeling the pinch as they are now required to set aside larger down-payments to access the market.

Those selling out homes so as to size up, particularly in cities having happening housing markets, won’t perhaps feel the burden as they have raised significant equity by those properties.

Impact
The pressure caused by the new regulations on home prices is, however, projected to be relatively small, given their slender reach.

Finance Minister Bill Morneau, while announcing the changes in December last year, said they are likely to influence 1 percent of the real estate market, or perhaps even lesser segment.

Sales activity
Some analysts forecasted a rush in sales after the changes, asserting that they would entice homebuyers who were looking to avoid bigger down payments.

Phil Soper, CEO Royal LePage, said that sales activities in Ontario and Quebec have been “boisterous” in the first 5 weeks of this year, but he backed for low mortgage rates and rather mild winter.

Past measures
Four spells of amendments were introduced to secure eligibility regulations for new, insurable loans during 2008 -2012. The minimum down-payment among them was raised to 5 percent, maximum amortization limit was sliced down from 30 to 25 years and the insurable house price limit was kept below $1 million.