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How the new "10% minimum down payment" works

Federal Finance Minister Bill Moreau announced in early December the government is increasing the down payment requirements for homebuyers seeking to purchase properties over $500,000. The move is designed to cool down the smoking-hot housing market in some of Canada’s biggest cities (namely, Vancouver and Toronto).

Homebuyers will have to put 10 percent down on the portion of the price over $500,000.

Anything under $500,000 will still only require a five percent down payment.

"This will impact one percent or less of the market,” Morneau told a news conference.

Morneau says the new measure is aimed at expensive homes while still encouraging first-time homebuyers to get into the market.

Those selling their homes in order to size up, especially in cities with hot housing markets, likely won’t feel the pain since they’ve built up equity in those properties.

Price impact: The influence over prices should be small given the narrow reach of the new rules, analysts say.

Financial institutions will also face new capital requirements to keep pace with the growing risk of the real estate markets they bankroll.

Source: MoneySense

Previous measures: Between 2008 and 2012, four rounds of changes were made to tighten eligibility rules for new insurable loans. Among them: the minimum down payment was increased five percent, the maximum amortization period was reduced to 25 years from 40, and the maximum insurable house price was limited to below $1 million.


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