Introduction:
Mortgage rules are changing again. The new measures, which came into effect Jan. 1, 2018, include A stress test for all uninsured mortgages (previously, only mortgages with a down payment of 20 percent or more were given a 'stress test') and a limit on the amount Canadians can borrow when refinancing their mortgage to 85 percent of the value of their home (previously it was 90 percent).
Mortgage rules are changing again.
A mortgage is a loan you take out to buy a house or other real estate property.
The rules for mortgages in Canada are changing again, but don't worry! If you're thinking about getting a mortgage, there are plenty of ways to make sure it's right for your needs and budget.
The new measures, which came into effect on Jan. 1, 2018, include:
Stress test for all uninsured mortgages. If you're not sure whether your mortgage is insured or not, it's best to check before applying for a new loan or refinancing an existing one. If your mortgage isn't covered by CMHC insurance (but doesn't meet the requirements for other types of homeowner's insurance), then you'll need to provide more information about how much money comes in each month and who owns the property.
New limit on refinancing mortgages. You may be able to refinance your existing mortgage if you're earning at least 80 percent of your current income and have been paying taxes on that income since January 2017—or if there is any equity built up in your home (not including renovations). However, this will only work if both parties agree; otherwise, there could be problems down the road!
A stress test for all uninsured mortgages (previously, only mortgages with a down payment of 20 percent or more were given a 'stress test')
The stress test is a way of making sure you can still afford your mortgage if interest rates go up. If the stress test shows that you would not be able to afford your mortgage if interest rates goes up, you will not be approved.
To pass the stress test, there must be enough equity in the property (the difference between what's owed on it and its value) and no outstanding debt related to it, such as credit cards or other personal loans.
This could include mortgages with down payments of 20 percent or more but no other assets such as cars or boats
A limit on the amount Canadians can borrow when refinancing their mortgage to 85 percent of the value of their home (previously it was 90 percent).
It's important to note that this rule only applies when you are refinancing your mortgage. If you're buying a house, the maximum limit is still 90 percent of the value of your home.
The new rules also apply to first-time buyers purchasing homes valued at $500,000 or more (previously it was $425,000).
Takeaway: There are new rules for getting a mortgage in Canada.
Now that you know about the new rules for getting a mortgage in Canada, it's time to figure out how they affect your life.
If you are a first-time home buyer and want to buy or refinance a home, there are no restrictions on how much money you can borrow.
If you have an existing home and want to make changes such as adding rooms or renovating the kitchen or bathroom, then there are some restrictions on what kind of mortgage loan is available (for example only a 5% down payment versus 10%).
Other than those few points above, most mortgages continue as normal with no real changes other than those outlined above!
Conclusion:
So, there you have it. The new rules for mortgages in Canada are a little complicated, but they’re not impossible to follow. We hope this guide helps you understand how the changes will affect your financial plans moving forward.
