New Mortgage Rules?

Mortgage application

This month the government came out with a few more rules with regards to downpayments.  These were put in place to help cool the market and to help ensure that buyers are fully capable of affording a property.  Will that actually help is another story!

What are the rules?

Properties under $500,000:

Same rules apply and you need a minimum of 5% down payment

Properties between 500,000-1,000,000:

You will need 5% on the first 500K and 10% on the portion between $500,000-$1-Million.  This is how it will look for a property priced at $800,000 for example:

5% on $500,000 = $25,000

10% on $300,000 = $30,000

Total MINIMUM downpayment will then equal $55,000.

Previously you could have purchased the same property with 5% down or $40,000.  Will this extra minimum downpayment really slow down the market?  I am doubtful as most buyers are buying with more than the minimum requirement.  It may force some first time buyers to save for an extra couple of years but overall I don’t expect this to dampen the Vancouver market.

Also it is important to remember that any time you are buying with less than a 20% down payment the lenders will require CMHC (Canada Mortgage and Housing Corporation) Insurance.  This is blended into your monthly mortgage payments.  While interest rates still remain VERY low it’s a great time to speak with a mortgage professional to get a pre-approval started.  I work very closely with a few and would be happy to recommend one that would be a good fit for you.

Property Transfer Tax Has Also Changed!!

Property Transfer Tax is a tax required by all purchasers in British Columbia except for a few exceptions with first time home buyers.  It is calculated as such:

1% on the first $200,000

2% on the remainder

For the same $800,000 property you will be looking at a one time Property Transfer Tax payment at closing of $14,000.

The change is now for any purchaser buying a brand new building under $750,000 will be exempt from this tax and any buyer paying over $2,000,000 will pay 3% on their portion that is over $2-Million.  A great calculator can be found here (

How will this effect the market?  It will make planned investors more attracted to pre-sale developments to save their property transfer tax and it may heat up the market before $2-Million but I do not believe it will have a significant impact.  For those buyer $2 – Million + homes the slight increase in property transfer tax will likely not be a deal breaker.