This week the Government of Canada announced changes to required down payment on higher priced homes, effective February 15, 2016.  Loan applications submitted prior to Feb.15, 2016 will remain the same, as long as possession date is prior to July 1, 2016. This was done to cool the hot real estate markets in Vancouver and Toronto, while trying to create the least amount of impact on real estate markets that are less strong or even weakening.

Current Down Payment Requirements

The current rules require a 5% down payment on properties up to $999,999.  For properties over $1 Million, you must have a minimum 20% down payment.

 New Down Payment Requirements

Starting February 15th, purchase up to $500,000 still only require a 5% down payment, but any amount above that will require 10% down payment on the amount above $500,000. For properties over $1 Million, you will still need to have a minimum 20% down payment.

Here's an example:
A $650,000 purchase requires a 5% down payment on $500,000 and a 10% down payment on the additional $150,000. Starting on Feb. 15th the down payment required will be $40,000.

The down payment required right now is 5% of $650,000, or $32,500.

You will need $7,500 more down payment to purchase a $650,000 home.

Any mortgage insurance application received between December 11, 2015 and February 15, 2016 that does not conform to the new requirements must have a mortgage in place by July 1, 2016.   

Will This Impact You?  Not likely...

Our team has discussed this and had conversations with other real estate professionals.  We all agree this will not have a significant impact on the Edmonton and area market.  Here are some reasons why:

• Our average residential purchase price in Edmonton was $369,559 last month*.  The average selling price for a single family dwelling was $432,862*.  The median selling price for a single family dwelling was $401,611*.   These new requirements will not impact the majority of buyers in Edmonton.

• Those purchasing in the $500,000 to $650,000 range will need more down payment, but because of the structure where the first $500,000 still only requires 5%, the higher down payment it is incremental.  It is not double. 

• The biggest impact is for those purchasing between $750,000 and $1,000,000.  In Edmonton, there are very few transactions at that price point and the buyers in that price range already tend to have a down payment of 10% or more.

If You Want To Read More:

Department of Finance Canada - Official News Release:

http://www.fin.gc.ca/n15/15-088-eng.asp

Q and A supplied from the Department of Finance Canada:

http://www.fin.gc.ca/afc/faq/hdpmeh-mfperpc-eng.asp

If you have any questions or concerns about how these changes impact you, please contact me.

 *REALTORS Association of Edmonton for all-residential sales in Edmonton Census Metropolitan Area (Edmonton and municipalities in the four surrounding counties) in November 2015.