The Beaches, Leslieville, Riverdale and East York Real Estate Specialists – Your East End Toronto Real Estate Team | The Wright Sisters Team

Important Mortgage Rule Changes

05 October 2016
LINDSAY WRIGHT

The government has made some mortgage rule changes. What this means: - EFFECTIVE OCTOBER 17TH, ANYONE BUYING A NEW PROPERTY WITH LESS THAN 20% DOWN MUST QUALIFY BASED ON THE POSTED RATE (4.64%) - THIS CAN MEAN THE DIFFERENCE IN $150,000 OR MORE FOR SOME BUYERS IN BUYING POWER http://www.theglobeandmail.com/news/national/ottawa-unveils-new-housing-measures-to-slow-foreign-real-estate-investment/article32206297/

 

Therefore, first time buyers looking to buy with less than 20% down, we would highly recommend buying something (have a firm accepted offer) in place before October 17th, 2016.

  If you have a pre approval in place based on the 5yr fixed rate mortgage of (say 2.39%)...your pre approval will not be the same after October 17th. The pre approval amount will go down and could go down a lot.

This is not good news for first time buyers or anyone buying with less than 20% down.

 

1)      If you have an approval in place (firm excepted offer) prior to October 17th, you can close up to 120 days later.. the rules are grandfathered.

2)      If you have an insured pre approval now, you will have to get a new one after October 17th. This is very important, especially if anyone is considering waiving the financing condition. 

3)      This rule change does not effect you now if you have at least 20% down payment (this could change as well) - we will see... fingers crossed it does not. 

 

What this means in real numbers... if you are looking to buy a property with less than 20% down, your budget has dropped by 20 to 25% on average. This is very unfortunate for first time home buyers especially. To see some examples of the impact:

Buying before October 17th (buyer with 10% down)

- your budget to buy - $400,000 purchase price

Buying After October 17th 

- your budget goes down to - $300,000 purchase price. 

This is drastic, but true. 

In short if you have been looking or thinking about buying, this could be your last chance to get into the market for a while. 

 

The other rule changes affect Non resident buyers, for more information on those changes please contact us.