New down payment guidelines may be in the works

New down payment guidelines may be in the works

New down payment guidelines may be in the works The Department of Finance is reportedly recommending tougher down payment requirements, and initial broker reaction may be softer than expected.

“These changes won’t make a huge difference; we need to stabilize the economy, especially the housing market, and this would help,” Jerry Brar, principal broker with Jerry Brar Mortgages, told “These changes would eradicate buyers who shouldn’t qualify.”

Brar also argues the changes will help keep home prices in check, which he says the market needs.

Originally reported by Canadian Mortgage Trends -- citing a “high-level lender source connected to the DoF, who declined to be identified” – the Department reportedly may recommend a graduated down payment scale that could be structured like this:
  • Homes costing $0 to $500,000 would require at least 5% down
  • Homes costing $501,000 to $700,000 would requires at least 7% down
  • Homes over $700,000 would require 10% down
When reached for comment, the Department of Finance said it does not comment or speculate on possible policy actions, or discuss anything that might be under consideration.

“The Government continuously monitors the housing market and regularly reviews the merit of actions to support the long-term stability of Canada's housing market and financial system,” the Department wrote in an email to “Mortgage insurance rules have been adjusted in the past to protect Canadian families who hold wealth in their homes, and Canadian taxpayers, who support home ownership through government-backed mortgage insurance.”

If it does come to pass, the new guidelines may be more welcome among brokers than previous rule changes.

“I don’t think it’s an overreaching policy and I don’t think it would hinder business,” Kevin Gillis, a mortgage consultant with Cameron Financial Consultants, told “Buyers looking for houses over $500,000 usually have higher incomes and can handle the higher down payments; forcing them to do so will help protect them financially.”
  • James Robinson 2015-12-03 9:21:05 AM
    I don't have a fundamental problem with this concept, however, hopefully all of the brilliant minds in Ottawa will realize that the purchase price thresholds must be scaled based on average prices in each community or at least group them the way lenders group areas for sliding scale purposes. $500k buys a closet in Toronto and Vancouver and a mansion in Windsor or Saint John.
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  • Joe Potenza 2015-12-03 9:29:45 AM
    I agree with James comments.
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  • Robert Clancy 2015-12-03 9:44:01 AM
    The down payment sliding scale on home prices is not a bad idea if rules are going to be implemented. The statement that anyone with only 5% down should not be borrowing does not make sense as borrowers have being doing this for years. The housing market in Toronto and Vancouver are strong but this is not the case all over Canada. Money is very cheap right now with a lack of supply so this is a big factor to higher prices in these areas. Messing around with lending polices is not always the answer. Creating jobs and improving economic growth will increase rates which in turn will correct the real estate market.
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