Important news about regulation changes that could affect you if you are considering a Winnipeg mortgage.
At the beginning of October of 2016, the Government of Canada released information about new procedures that will make changes to the previous mortgage regulations and could impact anyone looking for a mortgage in Canada.
Changes have been made in regards to eligibility rules and criteria for prospective Canadian homeowners as well as for foreigners in the hopes of preventing foreign buyers from making false claims of residency exemptions on tax forms.
These new regulations have been designed by the government with the strength and stability of the real estate and real estate financing markets in mind. The federal government maintains that these new measures have been put in place as a response to concerns over severe increases in Canadian home prices. Many believe that this price increase could result in increased foreclosures if the currently low interest rates start climbing again.
High ratio mortgages will see the most change once these new rules take effect. High ratio mortgages are mortgages that involve a loan to value ratio greater than or equal to 80 per cent. This means that the borrower is making a smaller down payment, 20 per cent or less of the total home value, to be exact. A low ratio mortgage would be a mortgage in which the borrower makes a down payment of more than 20 per cent.
These new eligibility measures require that any high ratio mortgage be “stress tested.” This requirement helps to ensure that the borrower would still be able to afford their loan payment, including interest, should interest rates increase in the future. “Stress tests” are currently being used to assess mortgages of variable rates for terms of less than five years. This same practice will now be adopted for all high ratio mortgages, regardless of the term.
Because these new procedures have just gone into effect, it is hard to judge the exact impact they will have on the real estate and finance markets. The effects of these new requirements will vary on a case to case basis due to differences in related circumstances.
We will continue to monitor the situation and relay additional information as we find out more.
As your trusted Winnipeg mortgage broker, I am here to answer any questions you may have. Feel free to contact me for more information or mortgage related advice.