You have likely heard in the news that there are (yet again!) new mortgage rules coming into place for Canadian homeowners. Will it affect you? If you're refinancing, if you don't have 20% of the purchase price for a down payment, or if you're buying a home over $1 million without a 20% down payment, the simple answer is, YES!
There is so much lingo involved in these media releases that you may not fully understand what's being done here. Hopefully I can break it down for you so you have a bit more knowledge. Although I'm providing this information here, I always recommend talking to a mortgage broker if you have any questions; I know some great ones if you need extra advice!
This graphic from the CBC News website helps to explain it:
Basically, what you can afford is going to decrease rather significantly. According to Robert McLister - mortgage broker and editor of Canadian Mortgage Trends - this will decrease your maximum mortgage amount by approximately 9%. This change is most likely going to affect first-time homebuyers, both in how much they can afford, and when they will be able to begin participating in Canada's housing market.
Watch this interview with McLister:
It's no secret that the last 6 months across Canada, the real estate market has been on fire. The federal government has made these changes primarily to cool it down. Benjamin Tal, Deputy Chief Economist with CIBC World Markets, says that this is partly because the interest rates have not risen as they were expected to. These measures are being put in place to balance out the market.
For the fourth time in as many years, Canadians have seen some incredible changes in the mortgage industry. Certainly in the long term, this is being done to help us all out long-term, however it does limit who gets to partcipate in the real estate market.
So unless you plan on buying your house in the next 18 days, start scrimping for your down payment, keep your credit rating high, and get into a stable position in your career. All of these factors weigh heavily when a mortgage broker fights for you, so give yourself a shot for the future! All is not lost, you might just have to wait a bit longer.