{"id":7409,"date":"2016-10-05T09:32:17","date_gmt":"2016-10-05T13:32:17","guid":{"rendered":"http:\/\/www.zoocasa.com\/blog\/?p=7409"},"modified":"2016-10-05T09:47:09","modified_gmt":"2016-10-05T13:47:09","slug":"new-mortgage-rules-may-impact-your-ability-to-buy-a-home","status":"publish","type":"post","link":"https:\/\/www.zoocasa.com\/blog\/new-mortgage-rules-may-impact-your-ability-to-buy-a-home\/","title":{"rendered":"New Mortgage Rules May Impact Your Ability to Buy a Home"},"content":{"rendered":"

Getting a bigger mortgage may become a little harder for some homebuyers, following a Monday government announcement that insured mortgages must now undergo a stress test.<\/p>\n

As of October 17, \u201call insured homebuyers must qualify for mortgage insurance at an interest rate the greater of their contract mortgage rate or the Bank of Canada\u2019s conventional five-year fixed posted rate [currently 4.64%],\u201d the government stated.<\/p>\n

This requirement is already in place for high-ratio insured mortgages with variable interest rates or fixed interest rates with terms of five years or more.<\/p>\n

Slashing Spending Power<\/h2>\n

The new rules mean homebuyers without a down payment of 20% or more won\u2019t be able to spend as much on a home. For example, let\u2019s assume a household with an annual income of $100,000 has saved $40,000 and they qualify for today\u2019s best mortgage rate<\/a> of 2.17%. We\u2019ll estimate their monthly property taxes are $400 and their monthly heating costs are $150.<\/p>\n

Using RateHub\u2019s mortgage affordability calculator<\/a>, they\u2019ll be able to afford a home worth $665,345 under the current rules. But under the new rules, the most they could spend on a home will be $521,041\u2014a difference of $144,304.<\/p>\n

\u201cBecause they tend to be the primary users of mortgage insurance, first-time homebuyers necessarily would be the most affected by the change,\u201d says a research note from RBC senior economist Robert Hogue. \u201cIt is important to note that these changes will have implications not just in Vancouver and Toronto but all across Canada.\u201d<\/p>\n

Related Read: Federal Government to End Tax-Free Home Sales for Foreign Buyers<\/a><\/strong><\/p>\n

Existing Mortgages Won\u2019t Be Affected<\/h2>\n

The new rules will only apply to mortgage applications received on or after October 17. However, they won\u2019t apply to mortgage loans where, before October 3: \u201ca mortgage insurance application was received; the lender made a legally binding commitment to make the loan; or the borrower entered into a legally binding agreement of purchase and sale for the property against which the loan is secured.\u201d<\/p>\n

Mortgage loans where a mortgage insurance application is received after October 2 and before October 17 aren\u2019t affected by the rule change either, but only if the mortgage is funded by March 1, 2017.<\/p>\n

The change will apply to new mortgage insurance applications and won\u2019t affect Canadians with existing mortgages.<\/p>\n

Efforts to Cool the Market<\/h2>\n

Finance Minister Bill Morneau says the changes are meant to ensure Canadians are taking on mortgages they can still afford should interest rates rise or their incomes decline in the future.<\/p>\n

\u201cFor many years, and especially since the financial crisis of 2008, low interest rates have gradually changed the way both lenders and borrowers view debt and indebtedness,\u201d he says. \u201cAs these attitudes and behaviours have changed, some households began carrying high debt loads and pockets of risk have begun to emerge.\u201d<\/p>\n

The government has tightened mortgage rules a number of times over the past few years. For example, it did away with 35- and 40-year mortgage amortization periods (30-year amortizations are still available with a down payment of 20% of more).<\/p>\n

Earlier this year, new mortgage rules came into effect that requires homebuyers to put down more than 5% on homes costing more than $500,000 and less than $1 million. For the first $500,000 of the home price, the 5% minimum down payment is the same. But there\u2019s also a 10% minimum down payment on the portion of the price above $500,000.<\/p>\n

RateHub.ca is a website that compares\u00a0<\/em>mortgage rates<\/em><\/a>,\u00a0<\/em>credit cards<\/em><\/a>\u00a0<\/em>and<\/em>\u00a0<\/em>deposit rates<\/em>\u00a0<\/em><\/a>with the goal to empower Canadians to search smarter and save money.<\/em><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Getting a bigger mortgage may become a little harder for some homebuyers, following a Monday government announcement that insured mortgages must now undergo a stress test. As of October 17, \u201call insured homebuyers must qualify for mortgage insurance at an interest rate the greater of their contract mortgage rate or the Bank of Canada\u2019s conventional […]<\/p>\n","protected":false},"author":42,"featured_media":7411,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jnews-multi-image_gallery":[],"jnews_single_post":[],"jnews_primary_category":[],"footnotes":""},"categories":[487,172,468],"tags":[1046,1047,1045,1048,1044,1043],"class_list":["post-7409","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-guest-posts","category-mortgage-news","category-mortgages-2","tag-bill-moreau","tag-federal-government","tag-high-ratio-mortgages","tag-mortgage-qualifying-rate","tag-mortgage-rules","tag-ratehub"],"yoast_head":"\nNew Mortgage Rules May Impact Your Ability to Buy a Home: Zoocasa<\/title>\n<meta name=\"description\" content=\"New mortgage rules announced by 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