Here are answers to some frequently asked questions on the government changes to down payment requirements that take effect today, February 15, 2016.
The down payment requirement has increased from five per cent, to ten per cent for the portion of the purchase price above $500,000, but less than $1,000,000.
The application of the government down payment requirement during any transition can often be confusing. To clarify the application of this requirement, and the grandfathering of this new requirement, here’s a few snippets of what we learned from CMHC’s underwriting department.
Purchases
- The new minimum down payment requirement naturally only applies to purchase transactions, not refinancing your mortgage.
Unchanged Premiums
- We are advised mortgage insurance premiums will remain unchanged.
Important dates to remember
- If you received an insured mortgage approval between December 11, 2015 and February 14, 2016 (inclusively) with a planned closing date after July 1, 2016, the new down payment requirement will still apply.
- If you received an insured mortgage approval before December 11, 2015, and you entered into a purchase and sale agreement also before December 11, 2015, the “old” down payment requirement may still apply regardless of the closing date.
- If your planned closing date is postponed after July 1, 2016, “CMHC acknowledges industry realities and will accommodate delays that may occur that are beyond a lender or buyer’s control and will be looked at on a case-by-case basis.”
Switching Lenders
- If you wish to give your mortgage business to a different financial institution for a more competitive rate or product and you received an insured mortgage approval under the “old” down payment requirement before December 11, 2015 and the property and the buyers(s) remain unchanged, the new mortgage insurance application request made by this new lender would be reviewed in accordance with the “old” requirement, regardless of the date the alternative lender requests mortgage insurance approval from CMHC.
- Similarly, if the mortgage insurance approval from the existing lender was submitted between December 11, 2015 and February 14, 2016 inclusively with a planned closing date on or before July 1, 2016, this new mortgage insurance approval request will be reviewed in accordance with the “old” requirement.”
Again, these are just a few snippets of some frequently asked questions. You may likely have a few of your own so let me know yours. Be certain to speak to your own mortgage broker concerning your purchase if you’re under way as well.
Have a great rest of the week and remember, we are always here at Dominion Lending Centres to help you with your mortgage questions!