Federals are trying to change the rules for down payment for homes

The federal government is expected to tighten mortgage rules in an effort to cool the red-hot housing markets in Toronto and Vancouver, CTV News has learned.

The new regulations will increase the minimum down payment required to buy a home for more than $500,000, with portions beyond that amount requiring a 10 per cent down payment. The down payment on the first $500,000 will remain at five per cent.

For example, a home costing $700,000 would require a $45,000 down payment – a five per cent down payment on the first $500,000, added to a 10 per cent down payment on the remaining $200,000.

The regulations are expected to take effect in February 2016.

The regulations are expected to take effect in early 2016.

Buyers shopping for homes below the $500,000 mark will be unaffected by the new rules.

The announcement is expected from finance minister Bill Morneau sometime Friday morning. The government is expected to stress that the new rules are designed to foster equity and dissuade cash-strapped buyers who may be seduced by low interest rates.

The decision is based off research by the C.D. Howe Institute, an independent think tank.

The move is expected to take pressure off the Canada Mortgage and Housing Corporation (CMHC), which offers mortgage loan insurance for properties valued below $1 million.

Since the 2008 recession, the federal government has made it more challenging for Canadians to obtain CMHC-insured mortgages.

For homebuyers with a down payment of less than 20 per cent, the government decreased the maximum amount of time allowed to pay off a mortgage to 25 years from 40 years.

The move was intended to dissuade borrowers from making riskier purchases and instead encourage them to invest in less expensive homes.

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