Canada’s new mortgage rules should not prevent you from achieving your dream of purchasing a new home. However, you may have to do some extra research to find the best mortgage possible.

Who is affected by these new mortgage rules?

Simply put: everyone is affected—to varying degrees. The percentage of people that can no longer qualify for a mortgage is low (approximately 10%). Other people will have to rethink their projects to adhere to their new maximum borrowing capacity, which has been reduced.

To qualify, homebuyers must have good debt ratios, a good credit history and a stable income. A mortgage broker can determine and explain your borrowing capacity as well as find the right lender and mortgage solution that meet your needs.

Financial institutions are currently revamping their mortgage products. For example, it has become more difficult to refinance a home at 75% of its worth, or borrow in order to purchase a condo or a single family house and rent it out. 

As a buyer, what do I need to know?

Sometimes, these new mortgage rules may force people to renovate their current houses rather than buy bigger homes, or live in a condo a few more years before purchasing a bungalow with a big back yard. What you have to remember is that very few people will be severely and definitively affected by mortgage rules. You may have to make some compromises, such as choosing a neighborhood with less expensive houses. However, you will still be able to buy a home.

For example, a couple with a household income of $80 000 used to qualify for a house worth $400 000. However, with the new mortgage rules, that same couple can now access a home worth about $320 000. This means that homebuyers must reconsider their options.

Today, financial institutions offer a wide variety of mortgage solutions. Choosing the right lender is key. As a client, your priority is to find a lender that is ready to offer you a mortgage based on your needs. Don’t just focus on getting a rate! Whether your mortgage application is simple or complex, a mortgage broker will help you weed through various solutions and find the right loan and right lender.

The impacts of new mortgage rules on the real estate market

These new rules will undoubtedly lengthen the sales cycle for houses already on the market and pressure sellers of different types of properties to decrease their asking prices. You’ll have to wait until the end of spring 2017 to learn about the real impacts on the real estate market. One thing is for sure: everyone’s buying power has been reduced. 

On the flip side: if mortgage rates increase, people who are able to get a mortgage loan today will be better prepared to support a hike. This leeway means that borrowers are less likely to lose their homes if rates become higher.

Why have these rules been created?

The social impact of these new mortgage rules is positive. After all, nobody wants to have their home seized and face the resulting financial and family problems .

In conclusion, it is important to remember that Canada’s new mortgage rules have been created to make sure that borrowers can make their payments in the event rates increase. Homebuyers should view this simply as a means by the government to protect you.

Keys takeaways

  • Everyone has been impacted by Canada’s new mortgage rules to varying degrees.
  • You may have to make some compromises if you want to obtain a mortgage.
  • Just because one financial institution has refused your mortgage application does not mean all is lost. Each lender has its own set of criteria.
  • New mortgage rules actually have positive social and economic impacts.