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New CMHC Down Payment Rules Now in Effect

New federal mortgage rules are now officially in effect, but most market watchers don’t expect to see much change.

Just to recap: Ottawa has boosted the minimum down payment on insured mortgages valued at $500,000 to $999,000. In order to get mortgage insurance the down payment on the value above $500,000 is now 10%. The down payment on the value below $500,000 remains at 5%.

The move is widely seen as more political than policy. The finance minister’s stated goal is to “protect the people buying homes so they have sufficient equity in their homes.” It is expected that first-time buyers will be the most affected, especially in the country’s hottest markets. But it is unclear whether that is the target that needs to be hit.

A survey, last year, by Canada Mortgage Professionals suggests first-time buyers put down an average of 21% of their home’s purchase price. That puts them outside the regulations for mandatory mortgage insurance and beyond the reach of the new down payment rules. CMP calculates less the 10% of mortgages valued above $500,000 will be affected.

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