CMHC considers changes to down payment requirements for investment properties

As you know, the federal government is considering reforms concerning investment properties trying to restrain a significant home prices growth.

In a mandate letter sent from the Prime Minister in December, Housing Minister Ahmed Hussen was strictly ordered to “review the down payment requirements for investment properties” and create measures to “curb excessive profits” in that real estate sector.

According to Teranet’s report, last year, more than a quarter of all home purchases were made by buyers who already own a property.

“Our government is considering every tool available to address this issue,” – the Ministry of Housing and Diversity and Inclusion and Canada Mortgage and Housing Corporation (CMHC) said. “By developing policies to reduce excessive profits in investment properties, protecting small landlords and Canadian families, changing the down payment requirements for investment properties, we are aiming at the challenges the market is dealing with from several angles simultaneously.”

There was no information so far about what kind of changes are being considered, or when we are going to face them.

Today, non-owner-occupied rental properties with up to four units require a minimum down payment of 20%, as a rule.

According to mortgage expert Rob McLister, a 5% hike of the minimum down payment would probably slow investment purchases eventually. Meanwhile, introducing a 35% minimum down payment would slow such purchases significantly.

He also said the government may implement restrictions on the use of borrowed money (e.g. HELOC) for funding down payments.