Announced today by the Government of Canada's department of Finance, home-buyer's are going to see some changes in how their mortgage application is processed come October 17, 2016. This comes as no surprise with recent news that Canadians are taking on more than they can handle when it comes to financial debt. These changes will ensure home-buyers qualifying for mortgages can actually afford them. All Canadian Insured mortgages (mortgages that have less than a 20% down-payment), this is not mortgage insurance, will now have to undergo a "stress test". Prior to this change, 5 year fixed mortgages were exempt from this approval process but this is coming to an end. You now MUST qualify for the Bank of Canada's current benchmark rate which is currently 4.64% regardless of it's term and if it is a fixed or variable rate mortgage.
The principles behind the change is firstly to bring Consistency to insured mortgages to ensure Canadians can afford their home when interest rates change, second, to improve tax fairness among residents and non-residents on the sale of a principle residence , and third, to manage lenders risk. This is the second change to Insured mortgage rules this year.
“The Government’s role in housing is to set and maintain a framework that is equitable, stable and sustainable. The actions taken today prudently address emerging vulnerabilities in certain housing markets, while not overburdening other regions. They also rebalance government support for the housing sector to promote long-term stability and balanced economic growth.”
“This measure will increase homeowner equity, which plays a key role in maintaining a stable and secure housing market and economy over the long term. It also protects all homeowners, including many middle class Canadians whose greatest investment is in their homes.”
- Bill Morneau, Minister of Finance
If you are currently approved for a mortgage you will be safe if you finalize a home purchase before October 17, 2016 (possession can be after this date), but if you are pre-approved with no solid deal in place you will need to qualify with the new rules after October 17, 2016. If you are currently looking for a home and need the assistance of a professional contact us, we can definitely help you! Contact Shawna Eskiw, REALTOR with Re/max Real Estate at 780.460.1200 to get your house purchased secured.
You can read the full article from the government website here.
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