Big Changes Coming Dec 15th
Starting December 15th, the federal government has introduced changes to the way Canadians can purchase real estate and apply for mortgages in Canada.
This is coming at a time when the current federal government is trying to build confidence in Canadians to prevent an early federal election.
When implemented on December 15th, these changes are directly going to affect first-time buyers, those applying for insured mortgages, and those purchasing new construction homes.
Let's take a look at these changes and see how they affect you.
The first change coming into effect on December 15th is changes to default insured applications.
In the past, you could only get a default insured mortgage up to $999,999.
If your home purchase was a million dollars or more, you would be required to have a 20% down payment because you would no longer qualify for default insurance.
Now, that price has been increased to $1.5 million. So this means that if you're purchasing a home up to $1.5 million, you're going to be able to apply for default insurance so that you can put less money down on that home purchase.
The second rule change coming into effect on December 15th are changes to first-time homebuyer applications.
Currently, if you're applying for an insured mortgage as a first-time buyer, you can only receive a 30-year amortization if you're purchasing a new construction home.
But as of December 15th, for all first-time homebuyer applications, you will be able to apply for a 30-year mortgage on an insured application regardless if it’s a new construction or existing home.
The intention behind this is to make your mortgage payment a little bit more affordable by stretching out your amortization from 25 years out to 30 years and increasing what you qualify for on a mortgage.
The third change coming into effect on December 15th are changes to new construction applications.
As mentioned above, only first-time homebuyers can apply for a 30-year mortgage amortization on an insured application. But starting on December 15th, regardless if you’re a first-time buyer or not, anyone applying to purchase a new construction home as an insured mortgage application will be able to apply for a 30-year amortization.
Similar to the last change, this intention is to help make homeownership more affordable by stretching out your amortization from 25 years to 30 years, lowering your payment and increasing what you qualify for on a mortgage.
However although these changes are going to, in the short term, help address affordability in homeownership for Canadians, what you may notice is that the changes that are being put into effect are also going to make you pay more interest over the long term by keeping you in your mortgage longer.
Another point is that realistically, although a 30 year amortization will help slightly with increasing what homeowners qualify for, the gross income is still substantial to be able to apply to purchase a home at +$1 million.
So, these changes don't really affect the underlying more important issues, which is that home prices are too high and out of reach for the majority of Canadians.
Until we really address the supply issues and we begin building significantly more homes for Canadians to purchase, balancing out the supply and demand in the market, these types of changes are only temporary band-aids to an ongoing issue.
If you have questions on how these changes may be affecting you or your personal situation, feel free to schedule a call with us to learn more and see how we can help.
Article by:
Cody Rowe
Mortgage Consultant
Dominion Lending Centres
Modern Mortgage Group
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