New Mortgage Rules – Is This End?
I’ve been asked a lot of questions on the new mortgage rules taking effect on October 17th, 2016. Many people feel it could be the prick that bursts the bubble and that we are heading into some serious muddy waters. The CRASH is finally coming!
I wanted to take some time to talk about this briefly today and to shed some light on the recent updates and what this means to you.
Keep in mind I’m not a mortgage agent and these are my opinions based on my experience of Real Estate investing.
I’ve said it before and I’ll say it again, “Be careful of the headlines”. They are there to set out fear and to push the doom and gloom of any change.
Personally, I don’t see it that way. As investors, we’re taught to be resourceful, savvy and creative and I believe there’s opportunity with these new changes.
So what’s all the fuss about?
On Monday, the Minister of Finance announced new Canadian mortgage rules taking effect October 17, 2016.
There are a few different rules coming into effect but lets focus on the main one.
One of the rules will impact high ratio buyers, in other words those qualifying with less than a 20% down payment.. Now there’s a qualifying rate of 4.64% on not only variable but 5 year fixed rate mortgages as well. This is not the rate for the term of the mortgage, but rather the qualifying rate to ensure the buyer can afford the payment in the event of a rate hike.
For example, if a buyer is putting down 5% and they could afford a home for $400,000 with the new changes they can now only afford a purchase price of $300,000 give or take.
As investors, we should look at this as an opportunity. If homes continue to go up in value, we still look for opportunities to buy. If this slows the market down, we buy more. The great thing about being investors is you can do incredibly well when the market goes up, sideways or down.
Either way, this new change will have minimal impact to investors getting qualified for a mortgage.
Again, these are my own opinions. We will continue to look for the opportunities this will present, strategize and take the necessary action for ourselves and our investors.
Final note. Now is a good time to also look at getting a HELOC (Home Equity Line of Credit) if you have available equity in your personal residence or rental properties (prior to Oct 17th). This especially holds true to some homeowners and investors depending on the bank you are with.
Talk to your mortgage agent to learn more about these changes and how it could impact you if it does at all.
Keep your investor hat on, read between the lines and we’ll all do just fine. The one thing that’s been constant for the last 2000 years is change. Understand the changes, learn to adapt and we’ll make it through this like we have with the other 20 mortgage rule changes over the course of the last 8 years.
Gary Hibbert
