The Minister of Finance will implement the new down payment rules on February 15, 2016. They will affect anyone buying a home over $500,000.
If you buy a new home over $500,000 you will be required to put down 10% on purchase value over the $500,000 price point.
If you buy a home $499,999 or less you are still allowed to put down 5% or $24,999.95 to use this $499,999.00 purchase price example.
If you bought a home for say $600,000 you would have to pay 5% on the first $500,000 or $25,000 and then 10% on the remaining $100,000 or $10,000 which would bring you to the total price of $600,000. This means your total down payment on a $600,000 home would be $35,000 instead of the normal 5% which would have been $30,000. It seems a little complicated but really its not too hard to calculate.
These rules were put in place to help maintain a healthy and stable housing market in Canada. In most of Canada a first time home buyer would be buying at less then $500,000 so this will have little effect on First Time Home Buyers. In areas such as Toronto, Vancouver and Calgary the average single detached home is priced over the $500,000 mark, well maybe not Calgary quite yet, but we are close.
These markets will have a few issues with buyers wanting to get a foothold in the real estate market. My best guess is they may start in the condo market and then allow some equity build up and then move to the single detached home. Not such a bad idea for these growing metropolises.
In some case those buyers may visit the bank of Mom and Dad to get a little extra down payment. They may also decide to wait until they have saved the additional down payment.
From a mortgage brokers standpoint, I believe this was a good move. I am not happy with the timing due to all the recent rule changes, but it is prudent. My only hope is that the government will hold off on any further rule changes. Hopefully they can focus on getting some new infrastructure projects up and running putting some folks back to work.