New Mortgage Rules

07 October 2016
Remax-Condos-Plus

On October 3rd, a firestorm hit the real estate market when the minister of finance announced two changes to mortgage rules.

Closing the Loophole

The first rule was to remove the principal residence exemption for non residents. But think about it, how can a non-resident have a principal residence in Canada, Impossible! But now we're closing that tax loophole and that will have little impact on the real estate market.

'Stress Test' on Insured Mortgages

The Second change is more serious. Now, both high ratio and conventional mortgages insured under CMHC and two other companies must be qualified under the posted rate, and not the actual rate. Remember, for people who took out 5 year mortgages, they used to be able to qualify at the actual rate. The bad news is that the posted rate is about 2% higher than the five year rate. People then will be forced to borrow a lot less money and can afford a lot smaller priced properties.

The Good news is that it only applies to uninsured mortgages and the majority of conventional mortgages at banks are not insured. That means that those people do not have to qualify at the posted rate but the actual rate of their mortgage. Rest assured, banks will soon raise these rates too.