Last month, the government of Canada changed the way you buy a home. New mortgage rules, designed to protect the market and buyers from the shock of changing interest rates, have left some buyers confused. Here, we offer a breakdown of what these changes mean and how they affect you when buying your home.
Almost all buyers must now qualify for a 5-year term, fixed-rate mortgage at their bank’s posted interest rate, but can still chose any mortgage term. Buyers who are looking for a variable-rate mortgage, which is tied to the Bank of Canada’s rate, can still do so. They MUST, however, show that they can service a loan at the higher 5-year term rate. As before, principal home owners must have at least a 5% down payment and can chose a maximum amortization rate of 35 years.
Buyers looking to enter into the investment market also face more stringent rules. Those buyers looking to invest in an income property must have a minimum 20% down payment. In the past, such buyers could obtain a mortgage with 15% down. There is one exception to this rule. Buyers looking to purchase homes that will serve as both their residence and an investment property (such as duplex units) can still qualify with just 5% down.
Keep in mind that the new regulations are not insurmountable obstacles. “They may seem strict,” says Treena Rogers, Mortgage Associate at Jencor Mortgage Corp. here in Calgary, “but they are there to protect you.” Her advice to potential buyers is to read the new rules, think clearly and speak to a mortgage professional. “People are afraid they can’t qualify,” says Treena, “but knowing the rules and talking to a broker will make everything clear."
Ross PAVL Marketing Group
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