The Government of Canada introduced new mortgage regulations this week. These changes will make it more difficult for homebuyers to qualify for a mortgage in today’s real estate market.
Here are the new policies:
- Effective October 17, 2016 all new insured mortgages (CMHC/Genworth) must undergo a “stress Test” that will ensure a borrower has the ability to make their mortgage payments at a higher interest rate. Before these changes if you chose a fixed rate mortgage 5 years or grater the mortgage is qualified at the contract rate. Now the mortgage must qualify based on the Bank of Canada benchmark rate of 4.65%. this will lower the amount of money a client can qualify for on high ratio purchases.
Assuming an income of $40K per year and 95% financing, the maximum purchase price before October 17th is $420K and aftger October 17th is $335K.
- Effective November 30, 2016, mortgages insured by lenders through portfolio insurance and other low loan-to-value ratio mortgage insurance must meet the same loan eligibility criteria as high loan-to-value insured mortgages. This affects clients who might be looking to refinance and already have equity in their homes.
- Proposed changes to tax rules will ensure that the principal residence capital gains exemption is not abused, including by non-residents buying and selling a property in the same year.