There is big news for those of you who pay attention to the mortgage market in Canada: starting April 19th the rules regarding mortgages will change and while not too dramatic, they will affect many homeowners and investors in Calgary Real Estate and across Canada. The motivation behind these alterations appears to be to prevent people operating within the Canadian real estate market from taking on too much debt. In order to achieve this goal, the government is enacting three major changes:
1/ Changes to qualifying rate:
The first big change within this new legislation will be to require those qualifying for a mortgage to have that qualification based on a five-year fixed rate regardless of the actual rate they negotiate. While those who are looking for longer-term mortgages will not have to worry about this change, those who are looking into shorter-term mortgages will have to qualify for the longer term. Normally a five-year fixed rate is higher than say a one-year or two-year fixed rate mortgage, so essentially it forces Canadians to be able to support a higher interest mortgage (a hedge against probably rate changes).
2/ Changes to minimum down payments:
The second change will only effect those who are looking into investment properties. Currently a buyer can pay as little as five per cent for a home. However, this new rule will separate investment properties into a different category and require a 20 per cent down payment; if the property is lived in and there is a rental 'income' suite, the usual five per cent down payment still applies. So an investor in the Calgary real estate market might want to move before these changes occur.
3/ Changes to the refinancing limit:
This change will have one of the bigger impact upon home owners. The new rules will change the refinancing limit from 95 per cent to 90 per cent. The logic behind this move is to force home owners to keep more equity in their homes, meaning if prices decrease again this increased equity will act as a safety net and to encourage homeownership as a savings tool.
The overall purpose of these changes is to prevent Canadians from taking on excessive debt; a response to the market crash of 2008 that took place (and is still taking place) south of the border where consumers taking on excessive debt was a major contribution to the US housing bubble. However, for those thinking about buying into the Calgary real estate market, whether as an investor or owner, should not be discouraged, instead it might be a good time to contact a realtor or mortgage broker to see how these changes will affect you personally.
If you're looking to sell or buy, do not hesitate to contact us.
We are prepared to work hard ensuring that your needs are met and that the result is more than you were hoping for. Nothing gives us more pleasure than your success and being with you through major life changes.