As a mortgage broker Oakville Ontario, James Loewen and his team are preparing for the new set of mortgage rules that will begin to affect Canadians as early as this year.
The Canadian government has announced some new changes to mortgages that will affect the nation’s homebuyers.
The new changes are designed to ensure that borrowers aren’t taking on mortgages that they can’t afford. This was mainly developed because of the historically low interest rates we have had over the last little while.
Finance Minister Bill Morneau stated in a press release that while the Canadian housing market is in a good state at the moment, he wanted to act sooner rather than later to minimize the risk of an unaddressed issue leading to something negative for the industry.
One big change comes with the fact that non-Canadian residents are now unable to purchase a home in Canada. As it was before the change, there was a loophole in tax laws where people who weren’t Canadian residents were able to buy a home in the country and then receive a tax exemption when they sell it.
According to Morneau, with the new changes non-residents will now not be able to claim the tax exemption for the year in which they purchased the home.
Another change that was made is that all insured mortgages now have to go through a “stress test”, something that will make sure that a borrower has the ability to fulfill their payments if interest rates were to increase. This means that borrowers will have their ability to pay their mortgage reviewed if actual rates were as large as what the banks typically post for five-year mortgages.
While this was already happening with many borrowers, the new changes required that all insured mortgages are now tested against the high rate. This will officially begin October 17, however current mortgage owners and those who have applied for one are exempt from it.
With the recent price hikes in regions like Toronto and Vancouver, the government felt they needed to react before it got to the point where it couldn’t be controlled.
According to a Bank of Montreal economist, this new rule will make it more challenging for homebuyers to secure a mortgage, especially when it comes to high-priced regions like Toronto and Vancouver.
Beginning November 30 of this year another change will begin to affect Canadians. The government will introduce new rules on when it will offer insurance for mortgages that are low-ratio based on a set of new criteria. Some of this new criteria includes a maximum amortization period of 25 years, a purchase price of under $1 million, a credit score of 600 for the buyer and the owner will occupy the property.
With these new changes starting to take shape in our nation it’s recommended that you consult a mortgage broker Oakville Ontario, such as James Loewen, to help guide you if you’re looking at getting a mortgage.
To view the most recent market update in Oakville, check out our blog post.
If you’re thinking of getting a mortgage, contact James and the team today to find out how they can help you!