This week, the Liberal government made a move to attempt to curb the demand for high priced homes in Canada. How will this affect our market here in the Shuswap?
To break it down, the new downpayment rules only affect those buyers purchasing a home between $500,000 and $1,000,000 who are also taking a high-ratio mortgage.
Since 2008, homebuyers in Canada have been required to have a minimum of 5% downpayment on their home purchase. This doesn’t change for purchasers under the $500,000 cap, which quite frankly, is the majority of homes purchased in the Shuswap area.
The new rules require a minimum of 10% down for the portion of purchase above the half million mark. For example, if you had a home selling for $650,000, the downpayment required would be $40,000 ($25,000 for the first $500,000 and $15,000 for the remaining $150,000). This is an increase in downpayment of $7,500 over the current rules.
As of December 12, 2015, there have been 932 properties sell in the Shuswap region. Of those, 89% (830 properties) sold for a price of$500,000 or less. Only 94 properties or 10% of our market would be affected. In case you were wondering, only 9 properties have sold over $1,000.000 this year. For those, the rule would be same as before and require a minimum of 20% down.
It’s not all bad though. if you can afford the extra money for the increased downpayment, it will likely mean a slightly lower mortgage insurance rate saving you a few dollars every month. It would also put you in a better equity position in your home and be able to ride out any ups and downs in the market.
The new rules take effect February 15, 2016. If your sights are set on $500,000+ house in the near future and you don’t have the extra downpayment money, you may want to make the plunge before the new rule takes effect. After February 15th, you may just have to set your sights a bit lower.
For more information, talk to your REALTOR®. We have a dedicated team of professionals here at Royal LePage Access Real Estate who are here to help. Give us a call!