Real Estate Reform and New Mortgage Rules

The federal government is throwing some cold water on Canada’s overheated housing market, hoping to keep Canadians out of unaffordable debt and slow down foreign investment in Toronto and Vancouver’s real-estate markets. Here’s a guide on what has happened so far, what it means and what’s next.

What’s changing?

Earlier this month, Finance Minister Bill Morneau announced a major shakeup of Canada’s mortgage and foreign-ownership rules for real estate. Some of those rules begin to take effect today. There are four big changes involved, The Globe’s Bill Curry explains:

  1. Expanding stress tests to all insured mortgages, not just mortgages in which the buyer has put down less than 20 per cent of the purchase price. This may make it harder for some buyers to get insured mortgages, even if they make a larger down payment, because it ends a two-tier system where some mortgages were weighed differently against the buyer’s income to see whether the mortgage is affordable. (To illustrate the difference in dollar terms, here are three scenarios and the maximum purchase prices that would be insured in each under the old and new rules.)
  2. Closing a tax loophole that some foreign buyers have used to claim exemptions in capital-gains tax for selling properties that they falsely claim as their primary residences. Now, home buyers must file taxes in Canada, as a resident, the same year they buy a home, before they can later claim the principal residence exemption on any gains for that year.
  3. Launching consultations to see if banks can take on added lending risks, which would lighten Ottawa’s obligations to pay for insured mortgages in the event of a housing crash – but could also lead to higher mortgage rates. 
  4. Changing the restrictions on portfolio insurance, a type of bulk insurance for mortgages with down payments of 20 per cent or more.

Excerpt from originally published article by: The Globe & Mail

Sean Mayers

Sean Mayers

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CENTURY 21 Regal Realty Inc., Brokerage*
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