Important Mortgage Rule Changes That Just Went into Effect

October 17th marked the beginning of some important changes to the mortgage process in Canada. If you are putting less than 20% down, you'll have to qualify at the Bank of Canada interest rate.

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There are some new mortgage rules that just went into effect here in Canada that we wanted to discuss with you today. We have known about these changes for a while, but they just went into effect on October 17th.

Before these changes happened, you could qualify for a lender’s best rate when applying for a mortgage, which in some cases was down near the 2.3% range. However, this rule has changed and now you will have to qualify at the Bank of Canada rate of 4.65%.

Of course, this change only affects buyers that have less than 20% to put down. As we understand it, anyone who can put down 20% or more on their mortgage is not subject to these rule changes.

These changes will affect many buyers.
The previous government had brought in a similar rule change, but it only affected a certain segment of the market, such as those with a three-year term or variable interest rate mortgage. Those people had to qualify at the Bank of Canada rate of 4.65%. With this change, all those who put less than 20% down will have to qualify at that same rate.

It makes sense that the government is doing this, because they don’t want a repeat of what happened in 2007 and 2009 in the United States with the subprime mortgage crash. At the end of the day, it’s going to have a direct impact on a lot of people, taking them out of certain price points or forcing them to buy a condo instead of a single-family home, or an apartment condo instead of a townhome. This could also lead to a lot of buyers sitting on the fence until they have more money to put down.

How will these changes affect sellers? Well, if you have planned on selling and buying a new home or want to pull out some equity in your home for renovations, you are going to have to qualify at that 4.65% rate too if you don’t have 20% to put down.

This is a pretty brief overview of the changes. If you have any questions about them or questions about real estate in general, give me a call or send me an email. I would love to hear from you.