On October 17th, the federal government set up new guidelines for qualifying for a mortgage here in Canada. The federal government says it’s responding to concerns that sharp increases in housing prices in Toronto, Vancouver and elsewhere could increase defaults in the future, should historically low interest rates finally start to climb.
One of the key changes is that homeowners will be subject to a mortgage rate stress test beginning Oct. 17. It does not matter what size of down payment they have. Before now, those with less than a 20 per cent down payment were required to pass a stress test and have mortgage insurance backed by the federal government through the Canada Mortgage and Housing Corporation.
The test measures whether the buyer could still afford to make payments if mortgage rates rose to the Bank of Canada’s posted five-year fixed mortgage rate.
That rate is usually significantly higher than what a buyer can negotiate with banks or other lenders. For instance, TD has a five-year fixed rate mortgage at 2.59 per cent, while the Bank of Canada’s rate is 4.64 per cent.
The stress test also sets a ceiling of no more than 39 per cent of household income being necessary to cover home-carrying costs such as mortgage payments, heat and taxes.
It has been said that Regulators are under intense pressure to do something because home prices are climbing fast and may be over-valued in some markets. They want to avoid any kind of catastrophe on their watch..
So is this a good thing for Canadian housing? Many markets outside of the larger centers are also experiencing a sharp increase in house prices. Here in Kitchener Waterloo, the demand for medium priced homes is literally a bidding war with many homes selling for far more than i think they should be. That being said, prices are a reflection of supply and demand so that current pricing is a direct result of many more buyers than sellers.
The new rules also mean that, beginning this tax year, all home sales must be reported to the Canada Revenue Agency. The gains from sales of primary residences will remain tax-free, but the government is aiming to block foreign buyers from purchasing and flipping homes while falsely claiming the primary residence exemption from capital gains tax.
It remains to be seen whether these steps will tighten the current market, expand or collapse it. My only advice is that if you are thinking of selling your home this fall that you take advantage of the extremely low inventory levels that we have in Waterloo region.
Give me a call and we can grab a coffee and discuss the best solution for you and your family. You can reach me at 519-497-4646 or email to firstname.lastname@example.org
Have a great day
October 26, 2016 | Categories: Buyers, Local Kitchener Waterloo, Random thoughts, Sellers, Uncategorized | Tags: cambridge, canadian, cmhc, home buying, home prices, home selling, house prices, kitchener, mortgage, mortgage rules, Remax, twin city, waterloo, waterloo region | Leave a comment
Are you looking to get into the market? Are you a first time buyer with less than 10% down?
If so then you need to be aware of recent changes to the mortgage insurance premiums that are offered through CMHC (Canadian Mortgage and Housing Corporation)
It was announced a few days ago that Canada’s federal housing agency is raising mortgage insurance premiums as part of a plan to boost its capital reserves.
Canada Mortgage and Housing Corp. said it is raising premiums on the highest-risk mortgages – borrowers who have down payments of less than 10 per cent – by 15 per cent starting June 1.
What does this mean for buyers?
The increases only apply to new mortgages for borrowers with small down payments. Those who put down more than 10 per cent of the purchase price aren’t affected. Premiums will also remain unchanged on CMHC’s portfolio insurance, which lenders take out on bundles of uninsured mortgages so they can securitized them, as well as the agency’s insurance for apartment buildings.
The effects will be modest for affected borrowers. An average Canadian borrower who can afford to pay the only the minimum 5-per-cent down payment typically takes out a mortgage of $252,000, CMHC said. Premiums for those borrowers would rise $5 a month, or about $1,500 more over the course of a 25-year mortgage.
CMHC predicted the changes would “not have a material impact on housing markets,” suggesting the agency isn’t looking to cool the housing market. Senior vice-president Steven Mennill stressed in a call with reporters that the changes were a “business decision” related to higher capital requirements and “not in any way related to a change in policy or approach.”
One thing is clear: By limiting increases only to borrowers with less than 10-per-cent down payments, the federal corporation is concerned that it was underpricing the risk on the most indebted borrowers.
Mortgages with lower levels of equity are typically more vulnerable to a housing shock and require higher levels of capital reserves to account for potential losses, which means higher premiums for riskier borrowers.
My advice would be is if you are thinking of buying a home this spring and have less than a 10% down payment that you take advantage of the lower premiums offered before June 1st.
For more details or questions please email myself at email@example.com or give us a call at 519-579-4110
Enjoy your week!
April 8, 2015 | Categories: Buyers, Local Kitchener Waterloo, Uncategorized | Tags: Bank of Canada, canadian mortgage housing corporation, cmhc, condo, condo buying, first time home buyer, full time realtor, home buying, home value, kevin baker, Kitchener waterloo, lofts in kitchener, market update, Mortgage News, Mortgage Rates, real estate, real estate investing, Remax, sales rep, waterloo ontario | Leave a comment
CMHC (Canadian Mortgage Housing Corporation) Announced that their Loan Insurance Program is going to be changing. What does that mean for Canadians purchasing properties with less than 35% down? Have a look at the chart below to see how the costs will be changing. If you have any questions or would like any advice please give us a call
March 3, 2014 | Categories: Buyers, Local Kitchener Waterloo, Sellers, Uncategorized | Tags: Bank of Canada, banking practices, cmhc, condo, first time home buyer, full time realtor, home buying, home value, inventory levels, Kitchener waterloo, lofts in kitchener, Mortgage News, Mortgage Rates, real estate investing, Remax, sales rep, waterloo ontario | Leave a comment