1. So what's really going on?
The new policy announced represents a graduated approach to increasing the down payment requirement proportionally to the cost of a home. Canadians who already hold mortgages will not be affected by this announcement. Bill Morneau, the Minister of Finance says "This measure will increase homeowner equity, which plays a key role in maintaining a stable and secure housing market and economy over the long term. It also protects all homeowners, including many middle class Canadians whose greatest investment is in their homes.”
2. What's changing exactly?
Effective February 15, 2016, the minimum down payment for new insured mortgages will increase from 5 per cent to 10 per cent for the portion of the house price above $500,000. The 5 per cent minimum down payment for properties up to $500,000 remains unchanged. This change applies to all purchase homeowner loans where the purchase price of the property is greater than $500,000, but less than $1,000,000.
3. How will the new minimum down payment requirement be calculated?
As an example, ff you are purchasing a $600,000 home: 5% down on $500,000 = $25,000 + 10% down on the balance of $100,000 = $10,000 for a total minimum down payment of $35,000.00. So to be clear, under the new policy you'll be required to come up with $5000 more for your down payment on the purchase of a home of $600,000.00. A purchase of $700,000 would require the buyer to come -up with $10,000 more for their down payment, etc...
How can I plan properly to avoid the increased insurance premium cost?
All new insurance applications received on or after February 15, 2016 will be subject to the increase, however, if your application is received before this date you'll save thousands. Its important to note that this does not mean you need to close/take possession of the new home before this date only that your application has to be received. If your application is submitted before February 15, 2016, and as long as the closing date occurs before July 1, 2016 you can still benefit from the lower premiums.
C/O Published with Brandon Scott at Benchmark Mortgages.
If you have any further questions about mortgages or if you would like your own free consultation with Brandon for a strategy contact Brandon at 780-800-5500 or Brandon@benchmarkab.com
RE/MAX River City
Include 4 conditions in your offer when buying a home!
Buying a home can prove to be a complicated task. It is not as straightforward as it seems. It is important to pay attention to different conditions, including those that are mentioned below. It will provide you with the guarantee that you will be able to buy safely.
One of the most important things that buyers should check would be the terms for financing. Most people will not be able to buy a new home in the absence of a mortgage. In this case, it is important to take a look at the specifications for financing, such as the interest rate. If there is a need to apply for a specific type of loan in order to complete the purchase, such condition should also be indicated in the contract. All financing terms should be agreed upon by both parties before finally affixing your signature and considering the negotiation as done.
2. Home Inspection
The home that you are going to buy must be subject into inspection. If the seller refuses to make it available for inspection, you have to refuse the offer. Typically, two to three days will be all that you need to have an inspection arranged. If in case the home inspection reveals significant problems with the property, such as structural weakness, you have the right to walk away and look for other properties to buy.
3. Sale of a Buyer’s Home Condition
This is a condition that will make it possible for the seller to bridge mortgages from the old and new home. The premise is that the property of the buyer must be sold first before being able to complete the transaction. Ideally, selling your house is better before buying a new home. Nonetheless, there are some instances wherein buying comes first because of prevailing market conditions. In this instance, sale of a buyer’s home is one essential that should be met.
4. Document Review
While this is something that you can do on your own, a better alternative is to hire the expertise of a third party agency to do this for you. Given their expertise, they have already gone through tons of similar documents in the past, and their insights will prove to be helpful in ways more than one. They can provide an analysis of the document, which might be difficult for an ordinary buyer. They can help in carrying out the necessary assessment, which will be instrumental towards determining the fees that you have to pay.
RE/MAX River City