It’s hard to believe it, but after a few months of planning and looking ahead, 2018 is finally here! As we all know, the start of a new year brings many changes. These include things like new goals and resolutions, new priorities, fitness plans and perhaps even a fresh, new outlook. This new year also brings another substantial change for Canadians – new mortgage regulations.
Widely discussed during the tail end of 2017, it’s likely that you may have heard that new mortgage rules were on the horizon, particularly if you were planning to purchase a home, refinance or renew your mortgage in 2018. However, you may not be aware of what exactly these new regulations entail and how they may impact you.
According to some financial experts, new mortgage regulations will affect quite a few families, as well as potentially cause the real estate market in Canada to cool slightly this winter. In fact, it’s been estimated that the new rules could disqualify approximately 10 percent of buyers – even those who have a considerable down payment at their disposal.
To break it down, basically the new mortgage rules will require individuals or couples to pass a ‘stress test’ that proves they could handle their mortgage payments at an interest that is significantly higher than their current rate. Although this requirement has already been in place for those with a down payment of less than 20 percent, the new regulations require everyone with a down payment of 20 per cent or higher to now also pass the stress test.
As a result of these new requirements, individuals may be forced to purchase a home that is less expensive than they had originally planned in order to ensure that they are able to satisfy the new requirements. Additionally, those who are renewing or refinancing may be forced to stick with their original lender, rather than have the ability to shop around for a better rate as lenders are not required to apply the stress test to current borrowers.
Before getting too stressed out by the new mortgage regulations and stress test requirement, it’s also important to know that there are other options available and ways to avoid the stress of the stress test. If you purchased your home prior to Jan 1st for example, you are exempt from the new mortgage regulation conditions, despite the fact that you may still be applying for a mortgage after the Jan 1st cut off. Some lenders are also offering a grace period in which the stress test will not be applied. It’s also important to note that the new mortgage regulations are only applicable for federally regulated lending institutions. Provincially regulated lenders, for example, may not apply the stress test condition.
Unsure of whether the new mortgage regulations will affect you, or exactly how they will affect you? Have questions about your legal rights when it comes to buying or selling in Bracebridge and the Muskoka area? We can help! We specialize in real estate law and can help take the stress out of all things real estate. Call the Ares Law team today at (705) 645-8743.
