The Rules Have Changed: 5 things to know about Canada’s new mortgage rules

If you’re seeking to buy a home between $500,000 and $1 million, then you will have to put down larger down payments as new federal rules took effect Monday June 30th.

Canadian homebuyers now face a huge challenge as a larger down payment is required for over $500,000. These new rules were implemented to tamper those heated real estate markets in Canada. Here’s a sneak peek at the five new rules:

A down payment of 10 percent is laid upon homeowners on the portion of the house price that costs over $500,000. For those of you seeking to buy a home for $700,000 — a shared price list on Toronto and Vancouver — it means the minimum down payment will increase from $35,000 to $45,000. Any house that costs under $500,000 still requires a down payment of 5%. Homes that cost over a million will require a 20% down payment.

Basically, those seeking to buy houses in Toronto and Vancouver will be affected. First-time buyers in those cities will be hit most since they’ll be required to put down more payments to get into the market. However, those selling their houses in order to size up, particularly in the hot market, probably wouldn’t feel the pain since they’ve built up equity in those properties.

Experts believe that these new rules will have a small influence over house prices. When Finance Minister, Bill Morneau announced the changes in December, he said that they are expected to affect one per cent or less of the real estate market.

Some sales analysts have dug deep into the matter and have reason to believe that there’ll be a surge in sales prior to Monday’s changes. According to Phil Soper, a CEO at Royal LePage, sales activities have been “boisterous” in Ontario, B.C. and Quebec in the first five weeks if 2016, but he credits a relatively mild winter and low mortgage rates.

Between 2008 and 2012, several rounds of changes were made to further tighten the eligibility of rules for insurable loans. These changes are as follows: the minimum down payment was increased to 5%, and the maximum repayment period was reduced to from 30 years to 25 years. In addition, the maximum insurable house price was limited to below $1 million.