What is this policy? ~ This policy increases the minimum down payment from 5 per cent to 10 per cent on the portion of the house price above $500,000. This policy does not change the 5 per cent minimum down payment for properties up to $500,000.
According to our lending sources ~ Qualified borrowers who get approved before February 15, 2016, can still buy with only 5% down. But lenders will likely set their application submission deadlines 1-2 weeks earlier.
Here is more information to help you explain the changes to the CMHC Down Payment revision.
- Qualified borrowers who get approved before February 15, 2016, can still buy with only 5% down. But lenders will likely set their application submission deadlines 1-2 weeks earlier.
- People will still pay the same default insurance premiums, based on their overall loan-to-value (e.g., 3.60% of principal for a 5% to 9.99% down payment).
- Check out these FAQs for more details.
- CMHC’s intent was to raise CMB costs equally on small and large lenders alike. The increased cost amounts to roughly 40 bps for all lenders, says a source very familiar with the change.
- The new guarantee fees reduce the attractiveness of securitizing via Canada Mortgage Bonds, relative to NHA MBS (where fees are also going up for lenders issuing over $7.5 billion worth of NHA MBS).
- The MBS guarantee limit was raised from $80 billion to $105 billion for 2016, but it won’t create any more MBS funding or risk. The extra is just to support new requirements of the CMB program.
- The government’s stated purpose of these fee hikes was to “encourage the development of private market funding alternatives by narrowing the funding cost difference between government-sponsored and private market funding sources.” Good luck with that. Insured mortgages, to which these fees apply, can’t be securitized outside of CMHC-sponsored channels. And no “private” CMHC-sponsored securitization markets exist (that we know of anyway).
- First-time buyers were mostly spared by these new down payment regs. Their average purchase price is $293,000, well under the $500,000 threshold.
- Moreover, less than 1 in 10 first timers are buying $500,000+ properties to begin with.
- Calgary could get hit the hardest (just what they need), because they have a much larger share of high-ratio mortgages, says Tal.
You can also read Canada’s Department of Finance- Frequently Asked Questions: Higher Down Payments for More Expensive Homes