Canada's new mortgage rules - what do the changes mean?
As of October 17th 2016, the Canadian federal government announced a major change in mortgage rules for home buyers.
These changes are intended to help protect the long-term financial security of borrowers, and to improve tax fairness for Canadian homeowners.
Here’s what Canada’s new mortgage lending rules mean for home buyers.
Prior to October 17th 2016 all mortgages, insured and conventional, are stress-tested for all variable rate mortgages, and fixed mortgages with terms between one to four years. After October 17, all insured or high-ratio mortgages (where the down payment is 20% or less than the value of the property), including five-year fixed mortgages, will be tested against the Bank of Canada’s five-year fixed term mortgage rate. The trouble is, BoC’s rate will approximately double what your mortgage lender uses to qualify you for financing - meaning mortgage lending amounts will decrease by apprx 18%.
For example: Prior to October 17th 2016, a potential borrower with an annual income of $80,000 with a down payment of less than 10% would previously have qualified for a maximum purchase price of $520,000 with a 2.29% rate. After October 17th 2016 this same borrower now qualifies for a maxiumum purchase price of $425,000.
To read more about the official Governmant announcement:
If you have any questions or concerns regarding these new regulations - contact us - your trusted Real Estate professional.