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A New Landscape for Home Buyers: What to Expect in Canada’s Housing Industry
As a home buyer, you’ll find that mortgages are only one among your worries. Currently, there have been a lot of changes in the housing industry, and it’s imperative that you stay updated to lessen the impact it may have upon you and your plans to buy a home. There are many financial aspects to consider including increased premiums, higher interest rates, etc.. Being an informed home buyer can lessen the chances of higher costs taking you by surprise.
Here are a few of the changes that are happening in Canada’s new landscape for home buyers:
New Restrictions for Mortgages with Insured Low Ratio
Conventional lending became affected when mortgages with insured low ratio were given new restrictions in November. With these new restrictions, lenders were able to mitigate risks through mortgage insurance, using it as a tool to make their funding more cost-effective. As a consequence for consumers, they are charged additional costs, resulting to higher interest rates for their mortgage loans. The conventional mortgages are now categorized as “Insured or Uninsured.”
The Insured Conventional Mortgages is the term used for Previously Insured Transfers or Purchases that are in the same category as mortgages with high ratios. This type of mortgages is qualified for 25 years of amortization at the Bank of Canada and also has a purchase price that’s below 1 million.
On the other hand, the Uninsured Conventional Mortgages can either be Transfers or Purchases that have longer amortization periods and lower rates of contract. These are also more flexible in terms of determining the qualification of the buyer.
New Rules for Mortgage Qualification
Last October, new rules were set for home buyers regarding the interest rates for their mortgage loans. The Department of Finance has implemented the “Stress Test,” which has reduced the maximum purchase amount for qualified home buyers. This affects 1 in 5 borrowers, either making them look for lower-priced options or completely stopping them from buying.
Insured Mortgages Get Increased Premiums
Just when you thought there won’t be any more bad news, the premiums for insured mortgages will increase come March 17. The Canada Mortgage and Housing Corporation (CMHC) announced that the increase of premiums will become highly dependent on the amount of down payment you’ve made. If the down payment you’ve made is higher, then this would mean that the increase in your premium will be more dramatic. On the other hand, for those whose down payment amounts to only 5%, then the increase will be 4% more than their previous premium.
New Restrictions for Mortgages with Insured Low Ratio
Conventional lending, which often means 20% down payment, would mean higher interest rates for consumers.
New Restrictions for Mortgages with Insured Low Ratio
Today, qualifying for the best mortgage solution can be a great challenge. It is often helpful to consult a mortgage broker who will be able to lay out all your options in front of you and help you make the right choice. With Canada’s current new landscape for home buyers, you might just need all the help you can get for you to find the solution that’s best for you.
