I can’t say I was surprised by today’s announcement that the government is raising the minimum downpayment rules for homes in excess of $500,000, form a minimum 5% down to 10%. It was just a matter of time before the new government was going to try their hand at tinkering with the Toronto and Vancouver Real Estate markets. Now despite all the hoopla and what I can only predict is two months of upcoming “the sky is falling” negative press that we are bound to endure, it will actually change next to nothing. That’s because the rules are still 5% down for the first $500,000 followed by 10% down needed for the remaining balance.
So for example, say you are looking to buy a house for $650,000 (which by the way is more than average for a first time home buyer) I will break out the number below:
Current Rules at 5% down- Buyers will have to come up with a downpayment of $32,500
New Rules as of Feb 15, 2016 at 5% on the first 500K followed by 10% for the balance- Buyers will have to come up with $40,000
That’s only an additional $7,500 dollar difference…
Now I get it that $7500 is a lot of money, but the reality is that most people buying $650,000 homes are NOT first time home buyers and are usually putting more money down. As for those who are first time home buyers? Most that can afford that price of a home on their first go usually have the additional funds available. So to summarize, it won’t make that much of a difference.
Let the Hunting Season Begin
Every time there is an announcement regarding home financing, the media and financial world goes into a predicting frenzy. Aside from terrorism, there’s nothing that get’s people attention better than scaring them with the possibility their biggest investment will go down the drain. Remember we had zero down, 40 year mortgages? Did going to 25 year mortgages with a minimum downpayment slow down the housing market? Nope.
Aside from the media, real estate and lending companies will be all over this too. Buy now before…. it’s your last chance…. List your house now before….
I said it, Hunting Season is officially declared on home buyers and sellers. Instead of focusing on hype, I’m going to enjoy my holiday break and and let the storm blow over. I will continue to advise my clients to make decisions based on numbers and logic. No high pressure sales tactics from me.
Questions of comments? I’d love to hear them!
