At HomeLife Power Realty Inc. in Guelph, we know how important it is that you stay informed about changes that affect you. That’s why we wanted to outline some recent changes to mortgage rules and requirements across Canada.
Back in October, 2016, the government of Canada passed new rules that stated all insured mortgage applications would require a stress test. Essentially, this test determines whether or not homebuyers would be able to afford their mortgage should rates rise.
So what does this mean?
The new changes are supposed to prevent homebuyers from defaulting on their mortgages. The biggest effect of these new rules will be on first-time homebuyers. Analysts have determined that the stress test will prevent many first-time homebuyers from qualifying for a mortgage.
The benchmark for the stress test is based on the Bank of Canada’s five-year fixed mortgage rate. This is often higher than what’s negotiated between the buyer and their bank or mortgage lender. While TD’s five-year fixed mortgage rate is only 2.59 percent, the Bank of Canada’s is almost double that at 4.64 percent.
Previously, homebuyers who were able to pay more than a 20% downpayment on their home were not subject to the stress test. With the new rules and regulations, it won’t matter how much you have for a downpayment - you are still subject to the stress test.
In addition, you’ll have to report your home sale to the Canada Revenue Agency on your tax return, starting in the 2016 tax year. While any money you make selling a primary residence will be tax-free, foreign buyers and sellers will have to pay taxes.
Have questions about how this might affect you? Contact HomeLife Power Realty Inc. for more information.