New Down Payment Rules & How They Affect You
Have you heard of the new down payment rules in Canada?
If you’re looking for a mortgage in Edmonton, or simply a mortgage in general, there have been a few adjustments to the the down payment rules you’ll need to be aware of.
For the most part these new down payment rules, which came into effect February 2016, generally deal with homes that are priced $500,000 or more.
Properties that more than $500,000 are the target of the new federal changes. On the bright side there’s no revisions on the first half-million dollars of a home purchase. Buyers can still put down no less than 5%, but anything above that requires, at a minimum, 10% down.
The new federal regulations are aimed at making sure homebuyers have enough equity in the homes and are generally not taking on something that’s way too over their heads financially.
Breaking Down the New Down Payment Rules
Let me set the scene, you and your partner are looking to finally stop renting and want to put down some roots in Edmonton. You decide on a new home that costs $650,000. The price isn’t outrageous and you and your partner have done the math and think you can afford the monthly mortgage payments.
In order to get the mortgage for the home you’ve set your eyes on, there’s two things you’ll need to consider. First is the down payment on the first $500,000 of the home’s price. In order to qualify for a mortgage you’ll need to have at least 5% of the initial $500,000. Doing the math, you’ll see that you need at least $25,000 for a down payment.
But with the new down payment rules in Canada, we’re going to need to deal with the remaining $150,000 of the home’s price separately.
As mentioned above, the first $500,000 of a home is subject to a minimum of a 5% downpayment and 10% for anything above the 500,000 mark.
Now it’s time to deal with the remain $150,000 in our example.
We need to calculate what 10% of $150,000 – and if you break out your calculators you’ll see that it’s $15,000.
So, if we continue with the example above, we’ll have to add the first 5% ($25,000) and the second 10% ($15,000) together where we get a total of $40,000 for a downpayment on a house that costs $650,000.
Now that you understand what you need to have saved up before you go house shopping you’ll want to find the best mortgage rate in Edmonton.
Find the Best Deal on a Mortgage
There are a few ways to go about finding the best interest rate and mortgage lenders in Edmonton but the most practical and time saving to go about doing this is through a mortgage broker. They scoure the market and help find you the best interest rate possible for the home of your dreams. If you’re interested in finding out a little bit more on how a mortgage broker can help you find the best deal available, please feel free to contact us.