Just when you thought you knew everything about mortgages in Canada, they changed the rules on you.
If you’ve been looking into getting a mortgage, you’ve probably learned a lot about how they work.
Whether you’re speaking to a mortgage specialist for the first or fifth time, there’s a lot to comprehend, and it’s likely not information you come across in your everyday life. This can make it a confusing process.
Now, just to make things even more complicated, new mortgage rules were implemented Canada-wide. We’re going to take a brief look at what’s changed, and we’re going to try to make it as simple as possible. After all, what are real estate agents for? To make your life easier, that’s what!
So if we lose you along the way with any of our complicated jargon or fun financial facts, simply reach out to us at The Raymond Yong Real Estate Group so we can have a real-life conversation instead!
Many new rules have been put into effect for Canadian mortgages, although much has stayed the same. At this point, enough has changed that you should probably be looking into this even if you already have one.
All of these updates were introduced publicly on October 3rd, 2016 and go into effect on October 17th, 2016, giving you a shockingly short period of time to prepare yourselves.
This means that if you haven’t yet been approved for your mortgage, you will have to be prepared to face the following stipulations:
If your down payment is less than 20%, or if you’re seeking mortgage insurance on high-ratio mortgages, you must qualify for either the posted rate of a conventional five-year term, or the contract rate. The deciding factor on which one applies to you is (of course) whichever one is higher. These specific qualifications were actually applicable to mortgages in the past, but only fixed or variable rate mortgage with a term of less than five years. This means that these prerequisites aren’t all that new, but will now apply to more people than they previously did.
Additionally, going forward, your low-ratio mortgage portfolio insurance will have the same standard as high-ratio mortgages. This changes went into effect on November 30th, 2016.
Lastly, a mandatory stress test has been implemented before the approval of all uninsured mortgages.
These new updates basically set consistent standards for insured mortgages, as well as some uninsured mortgages. While it’s always good to have uniformity across the board, this may impact your situation when it comes to buying a home. It will at least change a few things that may have been true if you started your house hunt mid last year, but haven’t quite made the move just yet.
Some other changes have gone into effect, which mostly inhibit the purchasing of property by non-residents, who were formerly not taxed as vastly as they will be going forward. This enabled a loophole where non-residents could still claim their property as their primary residence and profit from their ownership of the property.
If this isn’t already too much for you, these updates may lead to future changes in interest rates, which could negatively impact the affordability of homes. This is something to consider especially in the Toronto area and the downtown core. The major banks have already started to increase interest rates. While the increase hasn’t been substantial, there are indications that interest rates could rise further in 2017.
As if we needed anything else making it harder to afford a place in the city!
But don’t fret just yet, because there is still time to get into the market before anything else changes. If you’re looking to purchase any time in the near future, there is no time like now.
If you’re not sure how any of this affects you, or if you’re just unsure about anything you just read, contact us so we can explain this in English, translated from the mythical language of the mortgage broker. The Raymond Yong Real Estate Group can be reached at (416)-906- 9863, or via email at [email protected].
