Big Changes To Qualifying Rules
The Finance Minister Bill Moreau announced yesterday a big change to the mortgage qualifying rules, in an attempt to address concerns that Canadians are over extending themselves financially.
Here are the key points:
- If a borrower is getting a 5 year fixed rate, they can qualify using the 5 year fixed rate that they will be getting (i.e. 2.44%) in the qualifying calculation.
- If a borrower is getting a variable rate, or term less than 5 years, they must use the “test rate” (currently set at 4.64%) to qualify.
New Rules (effective October 17th)
- All insured mortgages (with less than 20% down payment) must use the “test rate” (currently set at 4.64%) to qualify.
New Rules (effective November 30th)
- All portfolio insured mortgages (monoline mortgages) must use the “test rate” (currently set at 4.64%) to qualify, and limit amortization to a maximum of 25 years, no matter what the down payment is.
- The maximum purchase price for portfolio insured mortgages (monoline mortgages) is $1 million.
Also… a change to capital tax exemption rules:
- Families that move will not have to pay capital gains tax on one home per year. If they move more than once in a year, they will have to pay taxes on any capital gains on the second, third, etc homes.
Who this will effect:
- Buyers with less than 20% down payment. – To buy a home with less than 20% down you need to buy mortgage insurance. You will now have to qualify at 4.64%.
- Buyers with lower declared income. – Even if you have 20% down, if your income is lower you may now only qualify with big banks (because they don’t back end insure).
- Monoline Banks!!! – This will reduce the number of borrowers that qualify with monoline banks, since they back end insure all their mortgages.
Read more at globe and mail…