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Toronto and Vancouver Mortgage Rules to Change Starting mid-February

Planning to purchase a new home? Moving to Toronto or Vancouver soon? You might be in for a surprise starting February 15,2016! Vancouver and Toronto’s housing markets are at a frenzy and the Liberal government turned to tweaking lending rules in an effort to cool them down.

The Big News

In an announcement a few weeks ago, it was revealed that new residential mortgages with portions in excess of $500,000 will be subject to a 10% down payment instead of the current 5% –  a change that will take effect a month from now. The first $500,000 will still be subject to a 5% down payment and existing mortgages will remain as is, with homes costing more than a million still having to follow the required 20% down payment, as shared by Finance Minister Bill Morneau.

Benjamin Tal, CIBC’s deputy chief economist says that Calgary could get hit hard by this change – because it has a relatively large share of high-ratio mortgages compared to other places.

A Matter of Safety?

Different policy changes had been placed in effect in recent years to limit Canadians’ vulnerability to financial risk in the event of a correction in the housing market. Since 2008, there has been four occasions when mortgage rules had been tightened to cool off blistering real estate markets. The cooling effect is indeed effective, albeit it should be noted that the effects are only temporary.

Morneau told reporters in an interview that the increase in down payment is believed to help with stabilising the entire market as well as make people more secure by creating a buffer. It is estimated that about 1% of the total market will be affected by this change; a number that is equivalent to an estimated number of less than 10,000 home purchasers.

Morneau further shares that the move is aimed to cool down and keep the housing market stable; more so for Toronto and Vancouver, both of which are sporting fiery hot real estate markets. 4% of Toronto’s home sales and 6% of Vancouver’s home sales are above $500,000; a big difference compared to the national average of only 1%.

The Minister also shared that the change is planned in such a way to not have a negative impact on certain markets, like Alberta’s where the situation is more challenging.

The announcement has been widely expected in light of growing concerns that homeowners could end up being in a very tight situation if prices suddenly collapse in an overheated market.

Comes with a Price

What does this mean for the aspiring home owner? A lot, apparently.

Those who may be planning to purchase a pricier home in Vancouver and Toronto might be ‘forced’ to put off doing so because they would have to save up more money for the down payment, not to mention having to meet some mortgage requirements like having a minimum annual income of $120,000 with no debts to qualify if someone wants to purchase a half million-dollar home. A family or individual with a monthly income of $7,000 after taxes and spends $5,000 to $6,000 on monthly expenses will need a few years to save up for the new down payment – something that’s not to be taken lightly.

Need help getting approved for a home mortgage or have some questions regarding this mortgage news? Meeting your real estate financing needs is our expertise! Contact us today!

Save More on Canadian Mortgages

The Canada mortgage is a fickle beast – there are some protections in place to keep you from losing your home but in the end it’s up to you to make sure that you’re getting the best deal. Keeping your interest low, avoiding excess penalties, and all the dirty tricks that a lender can throw at you are all part of the process. Working with us as your Toronto mortgage broker can help you navigate these tricky waters, save money, and find the right mortgage for you. Whether it’s a Canada conventional mortgage, private mortgage, or something in between we’ll be able to help you find the one that’s right.

How Much Can You Afford?

Your first stop on the Canada mortgage crazy train is figuring out just how much you can afford. Be honest with yourself, it’s okay not to be able to afford your dream house just yet. You’re going to need to take a realistic look at your finances and ask yourself this question: “Am I dreaming?” Just because you get approved for a high mortgage amount doesn’t mean you should actually buy a house for that much money. You’re going to need to know that you’re really getting the deal that fits your finances, not your dreams.

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Explore All of Your Options

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Work With Us

When you work with us you get all the help you need to get the mortgage that’s right for you. Don’t just settle when you can take advantage of lenders FIGHTING to do business with you! Even if you have bad credit, we’ll still be able to help you figure out a deal that works for you. Give us a call today and see what happens when you have someone on your side that knows how to find the best deal.