A breakdown of the mortgage changes in the last month

The mortgage industry has been abuzz this past month with major changes taking place and other notable news. If you’re confused about what has changed and how it will affect you, here’s a quick breakdown.

• Mortgage stress tests on insured mortgages: stress tests will be used for approving high-ratio mortgages on insured mortgages (less an 20 per cent down).  This is to assure lenders that home buyers could still afford mortgages if rates increased or their financial situations changed. The test also requires home buyers don’t spend more than 39 per cent of their income on home costs. This is in effect, as of October 17th.
• Restrictions for mortgage insurance: new restrictions on when insurance will be approved for low-ratio mortgages. Amortization periods must now be 25 years or less, $1-million or lower purchase price and buyer must have a credit score of 600+ and must be owner-occupied. This is in effect, starting November 30th.

These are the major changes as far as majority of home buyers are concerned. While this may make qualifying more difficult for first-time buyers, there is actually good reason for these changes.

The first reason is to ensure that Canadians aren’t taking on bigger mortgages than they can afford, especially when interest rates are historically low, and in very hot markets as well. Being an opportunist isn’t always a great thing in real estate, especially in Alberta where the economy has taken such a dip. Having the burden of multiple real estate properties can be tough for some people right now.

The other reason for these changes, is to address the increasing concerns about foreign buyers flipping Canadian homes. This was creating hostile real estate conditions in places like Vancouver, and some experts fear Calgary could be the next hit.

Regardless of the changes, please feel free to contact me to walk through what this means specifically for you.

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