New Regulations for Housing and Mortgages Coming into Effect
Wednesday Aug 30th, 2017
On October 3, 2016, the federal government’s Minister of Finance Bill Morneau announced that non-residents will no longer be able to avoid capital gains taxes on residential home sales by declaring them as their principal residences.
This is just one initiative designed to cool the housing markets in cities, such as Vancouver and Toronto, and to also slow the flow of foreign wealth into the Canadian real estate market.
In addition to this change, Morneau also announced new rules surrounding mortgage insurance eligibility criteria. Effective October 17, 2016, all new buyers requiring an insured mortgage will be subject to a mortgage rate stress test, which is intended to ensure that homeowners will be able to afford their mortgages even if interest rates go up or their income goes down.
“Currently, this requirement only applies to a subset of insured mortgages with variable interest rates or fixed interest rates with terms less than five years,” the government said in a backgrounder document. “Effective October 17, 2016, this requirement will apply to all insured mortgages, including fixed-rate mortgages with terms of five years and more. Homeowners with an existing insured mortgage or those renewing existing insured mortgages are not affected by this measure.”
It was also announced that mortgages that are insured with portfolio insurance, as well as low-ratio insured mortgages, have to meet the same criteria as for high-ratio mortgages to qualify. Buyers will need to have a minimum credit score of 600 and mortgages will need to have a maximum amortization period of 25 years.
Here’s Minister of Finance Bill Morneau with more on the new regulations for housing and mortgages:
In a nutshell, all of these measures combined should help to reduce the risk of a housing market correction in Vancouver and Toronto, as well as a broader abatement in Canadian household spending stemming from elevated debts. For full details, please click here.
If you are considering buying a home in the Greater Toronto Area, I recommend that you speak with a mortgage lender first to learn more about these new regulations and how they relate to your home buying situation.
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