How Canada’s New Mortgage Rules Affect You

If you are planning to buy or sell a home, you should be aware of some of the new rules that are in place, as it might affect your chances as a home buyer or seller. The rules require home buyers to meet new lending criteria and they must qualify for rates that are fixed by the Bank of Canada.

Insurance Mortgages

Prospective buyers who want to secure mortgage loans must be purchasing a dwelling that has an amortization period of 25 years or less and a value of less than one million dollars. Borrowers who have less than 20 per cent down will have to qualify for a rate that is set by the Bank of Canada. Borrowers with more than 20 per cent down will not have to qualify until Nov. 30, 2016. This gives borrowers who rely on portfolio insurance time to find another means of financing their mortgage.

Foreign Buyers

If you are not a Canadian citizen and you intend to sell your home, you will have to prove that your home in question is your principal residence to avoid paying capital gains taxes. This will affect foreign home buyers and sellers in Toronto where the market is strong.

Prospective Buyers

With the new rules in place, those who are yet to make a buying decision will have time to reassess their prospects of being able to purchase a new home. Even if you have been pre-approved, you should get a new assessment to see if you still qualify under the new rules.

Prospective Sellers

If you are looking to sell your home, the new rules could potentially affect your chances. It might be harder for prospective buyers to qualify for a mortgage and so you might lose some bargaining power with any prospective buyers you currently have.

What You Can Do

Before you decide to buy or sell your home, talk to your mortgage broker and familiarize yourself with the new rules. Make a careful analysis of your situation in light of them and see if you can still realistically purchase a home. If you are planning to sell your home you might have to lower the bar, as you might have fewer prospective buyers.

If you are seeking additional information on these rules, consult with one of our mortgage agents. If you were already pre-approved under the old rules, you should repeat the process to see if you still qualify.