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Update on the New Mortgage Rules effective April 19th and the Effect on the Real Estate Market
Canada's red hot housing market may get a little hotter following the federal government that new mortgage rule changes are coming to discourage cash-light buyers and speculators.

Market analysts say those who were just managing to qualify for government-insured mortgages may rush into the market before stricter rules take effect April 19.

Prospective homebuyers may also jump into the market this spring to beat coming interest rate hikes and, in Ontario and B.C., the introduction of the harmonized sales tax on July 1 that could add $1,500 to the cost of buying a home.


"The whole spring housing market is going to be on fire," predicted Derek Holt, vice-president Scotia Capital.


Basic Changes:
  • In order to qualify for an insured mortgage, borrowers will have to meet the standards for a five-year fixed-rate mortgage even if the interest they are paying is less. (buyers are still able to select variable or short term mortgages)
  • Qualified buyers can still purchase with 5% down, however refinancing of an existing mortgage will be limited to 90% max.  Consumers are being sent a message not to use their homes as ATM machines, and to leave some equity as savings in their properties.  
  • Speculators will be required to place 20% down on a rental property purchases, which isn't that much of a shock, as investors purchasing their 4th or 5th condo were traditionally expected to place more than 5% down on the purchase.



In practical terms, the new rules mean that on the average $337,000 home, homeowners will need prove they have the financial means to absorb an additional $2,500 in mortgage costs a year, the TD Bank says.   "It means if you are thinking of buying a $400,000 home, you may have to buy the $350,000 - $375,000 one."


TD Canada Trust president Tim Hockey estimated the rule change will effect up to 10 per cent of buyers, some who will choose not to buy and some who will opt to buy a smaller home.


The Vanier Institute of the Family reported Tuesday that average household debts loads climbed 5.7 per cent to $96,100 in 2009. The institute estimates some 1.3 million households could be vulnerable to a dangerously high debt service load by the end of 2011.


The minister insisted there is no housing bubble in Canada as yet, but added that with interest rates set to rise as early as this summer, he wants to ensure Canadians don't take on too much debt.


If you have a questions, please feel free to call our office manager at Sutton 905-896-3333 or 416-896-3333.

Contact Sutton by email at www.SuttonRealty.com


Sutton Group Toronto Real Estate - Mississauga Real Estate


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