1. The Federal Government will restrict insurance on mortgages to loans on owner-occupied dwellings with amortization periods less than or equal to 25 years, purchase prices of less than $1 million, and for borrowers who meet a minimum credit score standard of 600.
2. All insured mortgages in Canada (any mortgage where the borrower puts less than 20% down...) will be underwritten using posted rates to qualify borrowers based on their income. That means a borrower that could qualify for a mortgage at a 5-year fixed rate of 2.29% now will have to qualify - as of the 17th of October - at the qualifying rate of 4.64%.
3. Foreign Buyers will need to prove that a home they sell is their primary residence to avoid capital gains tax exemption abuse.
3. Foreign Buyers will need to prove that a home they sell is their primary residence to avoid capital gains tax exemption abuse.
Canada's new mortgage rules could leave millennials struggling to buy a home.
"Purchasing power" means the amount they (home buyers) can borrow to buy a home.
But there are benefits, too. Such as keeping them from buying properties they can't afford.
A family with a household income of $80,000.00 can currently buy a $505,000 home with a five per cent down payment.
But that wouldn't be possible under the new rules because of a "stress test" requiring all insured mortgages, which have down payments of less than 20 per cent, to be qualified at higher Interest Rates.
This hypothetical family could only buy a $405,000.00 property under the new rules — $100,000, or 20 per cent less than what they could have had before.The effects of these changes are hard to predict on each individual housing market in Canada. But it's probably safe to say that it'll cool the hot ones.
According to BNN, mortgage lenders are "swamped" as home buyers rush into the market ahead of new rules that will undercut the average family's home-buying power.
http://www.bnn.ca/mortgage-lenders-swamped-as-homebuyers-race-to-beat-new-stress-test-rules-1.585079
