Finance Minister Bill Morneau announces changes to foreign ownership of Canadian Real Estate as well as stress tests to holders of insured mortgages. The first to close a loophole in the tax laws and the second to ensure the borrower’s continued ability to make their payments.
Per York Pork, Mortgage Broker, with Mortgage Allance:
Starting October 17th, 2016, borrowers who take out insured mortgages that are fixed-rate loans of five years or longer will be subject to a more stringent “stress test”. Currently borrowers who take a five year insured mortgage (less than 20 percent down payment) qualify for their mortgage based on the actual rate they receive. Now under the new rule the mortgage amount that a borrower qualifies for will be based on the Bank of Canada’s posted 5 year rate which is currently 4.64%. Your actual payment of course will still be based on the rate you actually receive from the lender. This would result in most Canadians qualifying for a far less mortgage amount then they had anticipated.
As Mr. Morneau states “This would create a “buffer” to ensure that Canadians will continue to be able to easily service the mortgage payments in the event interest rates rise.” The impact is that you simply might not qualify for the mortgage and house you want after October 17th, 2016 due to using the higher interest rate to qualify.
What really matters is what this means to you and your family. As your mortgage professional I understand the new changes and how they can impact your clients purchases and mortgage. You still have until October 17th, 2016 to get a mortgage approved based on the old rules given that the home closes prior to March 1st, 2017.
