Four Big Changes to Canada’s Housing Rules and How They Affect You

The Liberal government is implementing new rules for Canada’s housing market, to protect people from taking on more mortgage than they can handle, and keep us from being the inspiration for The Big Short 2.

There is always lots to discuss whenever there is any change to the housing rules, and today we’ve got 4 changes to talk about. So let’s dive right on in.

Expanding a mortgage rate stress test to all insured mortgages

You probably already knew that, currently, buyers with a down payment between 5-20 % must be backed by mortgage insurance. But, as of Oct. 17, a stress test will be used for approving high-ratio mortgages will be applied to all new insured mortgages. That includes those with more than 20% for a down payment. 

The stress test is to ensure you can still afford your mortgage, even if rates climb. It also ensures that you’re not spending more than 39% of income on home-carrying costs like mortgage payments, utilities or property taxes. 

The government will impose new restrictions on when it will provide insurance for low-ratio mortgages

This one is aimed at Toronto and Vancouver’s worrisome and temperamental real estate markets. The new criteria states: 

•    Amortization period must be 25 years or less

•    The purchase price is less than $1-million

•    The buyer has a credit score of 600  

•    The property will be owner-occupied

New reporting rules for the primary residence capital gains exemption

Right now, any profit you make from selling your primary residence is tax-free and you don’t have to report it as income. But, in the new tax year, you will have to report it, even though it will remain tax exempt.

This is aimed at issues with foreign investors who buy and sell a home, while falsely claiming it to be a primary residence. 

The government is launching consultations on lender risk sharing

The gov’ wants to protect themselves from having to take the brunt of defaulted mortgages, so they will be releasing a public consultation paper shortly on a proposal to lenders, brokers, and banks. 

Experts are predicting that if banks and lenders have to assume more risk, mortgage rates may go up to compensate. It will be interesting to see how this plays out. 

Any questions?

It’s important to work with a knowledgeable realtor, whether this is your first home or your fifth.  You need someone who stays on top of all the current real estate trends and changes, to ensure you’re always getting the best possible price. 

We’ve helped countless people find everything they need in a new home in Burlington, and we can help you.

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