Drastic Changes to Small-Rental Financing

In recent years, many first-time homebuyers obtained housing in such sprawling urban centres like Toronto, Vancouver, and other major cities with significant success.  However, this was often made a possibility because these first-time home buyers opted for renting.   

To take a closer look at the housing market trends happening in major city centers download the information at Canada Mortgage and Housing Corporation:  http://www.cmhc-schl.gc.ca/en/hoficlincl/homain/foan/index.cfm

However, new rules effective of April 19 will ensure more difficulties in obtaining a mortgage.  This will impede some speculators’ ambitions of buying out multiple condominium units in large city areas.  In other words, Jim Flaherty, the finance minister, is attempting to place financial hurdles in front of buyers who took advantage of low interest rates and bought homes for renting purposes. 

This will essentially provide difficulty for individuals with property rental to qualify for their own mortgages on their personal residence.  According to Jack Aubrey, of the Canada Mortgage and Housing Corporation, the incentive behind the new property rental rules is simple: They are in place to stop further speculation in the market.  In essence, the rules are expected to impede investors from taking risks and behaving reckless in the housing market.   

Originally, landlords were allowed to use 80 per cent of their rental income to offset monthly mortgage payments.  However, under the new rule, the per cent of rental income landlord’s may use decreased to 50 per cent. 

This poses complications for landlords as this means the money will be used to offset monthly mortgage payments, instead of being added to their total income.  Subsequently, this move will compel them to qualify for the entire monthly mortgage.  To read on economists’ reactions at the Financial Post please visit:  http://network.nationalpost.com/np/blogs/fpposted/archive/2010/02/16/new-mortgage-rules-economists-reaction.aspx 

Since many rely on rental income as a way for them to qualify themselves for a mortgage, the new rule will be essentially creating difficulties for many to move from condos to houses.    

However, some see it as a good thing.  On the other side of the argument some see the new mortgage rules will ensure that only landlords with the financial and intellectual capabilities will be the ones managing properties.  Essentially, some argue it is a way to weed out the reckless speculators from the efficient and steadfast landlords and the actual prospective homebuyers.     

Problematic as it is, the risks have not decreased.  The result is that landlords are just not allowed to use as much as their income and this means inconvenience for those renting out their personal residence. 

However like most other things, there is a bright side:  Renters face no negative impact from these new rules. 

Victoria Carter and Kirk Rickman, Century 21 Percy Fulton Ltd Brokerage.  www.TwoMoveYou.com 416-298-8200


There are no comments

Thank you! Your comment has been submitted and is awaiting approval.

Victoria Carter

Victoria Carter

Sales Representative
CENTURY 21 Percy Fulton Ltd., Brokerage*
Contact Me