The Latest Mortgage Rules and How to Take Advantage of Them

• August 20, 2017

The Canadian government has announced a series of changes to the mortgage rules, and have introduced news ones. It appears that most of the changes are targeted at taming the high demand being witnessed in the country’s fastest growing housing markets – Vancouver and Toronto. Here are some of the regulations, the impact they are having, and the anticipated winners and losers, to illustrate who will likely benefit from these changes.

1. Insurance on mortgages to loans on owner-occupied properties will be restricted with amortization periods of less than twenty-five years, purchase prices of less than $1 million, and for borrowers with a minimum credit score of 600.
2. The underwriting of all insured mortgages in Canada will be done using posted rates to enable borrowers to get qualified based on their incomes.
3. For foreign buyers, it will be imperative for them to prove that a home they are selling is their primary dwelling so that they are not exposed to capital gains tax exemption abuse.
4. Capital requirement costs will go up as a result of the OSFI, and consequently, insurance premiums will also go up.

In as much as the above rules will have significant impact across the entire industry, middle class families seem to be the greatest beneficiaries, since the prices of houses will be in control and they will not feel as if the prices are beyond their reach. Since the rules are seen to mainly target the hot markets, it will now be easier for middle class families to gain access to houses in such places.

Additionally, it can be concluded with certainty that the new regulations will be effective in cooling the hot markets where house prices were seen to be unreasonably high. Such regulations are often considered a damper for the entire housing market, despite the diversity and uniqueness of each respective market.