Government Reduces Minimum Down Payment on Property Purchases
Canada’s major banks are applauding a new piece of federal legislation, which will lower the minimum down payment on home mortgages.
The government announced late last week that it was reducing the minimum down payment on an uninsured mortgage from 25% to 20%. This should save homebuyers an average of $2,500 in mortgage insurance premiums on a piece of property worth $300,000.
Existing Bank Act regulations, which have been in place for 40 years, prevent banks from loaning customers more than 75% of a property’s value, unless the buyer has purchased mortgage insurance.
“We see a number of customers scrambling to meet the 25 per cent down payment, in order to avoid paying the insurance premium,” commented Bank of Montreal executive, Cid Palacio. “These changes will allow those home buyers to reduce their down payment and get into their new home faster.”
The change in legislation will affect not only homebuyers, but also existing homeowners due to refinance a mortgage.