Down Payment to Rise to 10% on Homes Over $500,000

Federal Finance Minister Bill Morneau announced changes to the CHMC 5% down payment program to take affect February 15, 2016.  The government backed Canada Mortgage & Housing Corporation's program provides mortgage insurance to Canadians through lending institutions and is looking to reduce it's exposure in the market place by requiring buyers to increase their equity portion.

CMHC Loan-to-Value Premiums for 5%, 10% & 15% Down PaymentsThe Liberals have always expressed concern that home prices in certain Canadian real estate markets may be overheated, so they are increasing the minimum down payment required on a home in Canada from 5% to 10% on the portion of the purchase price over $500,000.

For a $600,000 home, the new 10% downpayment rule will apply only to the $100,000 above the $500,000 limit, not on the entire $600,000. That works out to 5% on the $500,000 purchase price ($25,000) and 10% on the next $100,000 ($10,000). The new total down payment will become $35,000 or 5.8% of the total purchase price, compared with the current $30,000 down payment requirement.  See the chart below for various down payment examples.

Less than 5% of the people applying for mortgages across Canada will be affected by this new ruling. Most bank economists believe that the new regulations will have a minimum impact on house prices.  A survey conducted by Business News Network showed that 69% of Canadians do no believe that the new down payment regulations will cool Canada's housing market. The mortgage lending industry opposes the new legislation because it says this will result in a drop in home sales - especially in economically challenged regions like Alberta.


The chart below shows exactly how down payments are affected for each home price category:


New CMHC 10% Down Payment Guidelines Explained



How Will This Affect the Calgary Real Estate Market? 

From January 1 to November 30 this year there have been 17,477 homes sold under $1,000,000.
Almost 70% (69.6%) of them were below $500,000.
The new legislation will have an affect on sales of homes priced in the $500,000 to $600,000 range the most. This range represents 15.1% of the entire market and is the closest to the transition point where there are still many first time buyers.
Compare this with 15.3% of all purchasers this year that were looking to buy a home in Calgary between $600,000 to $1,000,000. Above the $600,000 price range, many purchasers are coming in with a 10% down payment anyways. These numbers reveal just how critically important the $500,000 to $600,000 price category really is in the Calgary market. 
For most first-time home buyers with a fixed dollar amount, those contemplating a 5% down payment on a $600,000 to $700,000 home will now be forced to consider a home priced in the $500,000 to $600,000 range after February 15, 2016.  
Here are the Year-to-Date statistics from January 1 to November 30, 2015 for all homes sold in the city of Calgary:
17,477 homes were sold in Calgary up to $1,000,000
12,156 homes were sold up to $500,000                             69.6%
5,321 homes were sold from $500,000 to $1,000,000       30.4%
2,642 homes sold were between $500,000 - $600,000      15.1%
2,679 homes sold were between $600,000 - $1,000,000    15.3%


If you have questions about the current Calgary real estate market or your home value, 
contact us online, or call 403-837-8100. We're here to answer all your questions!


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