Whether you are a resident of Canada or even a non-resident (living and working abroad), you are probably wondering how to keep purchasing and/or refinancing when the mortgage rules keep changing like the wind!
Since last October, we have seen massive changes – everything from increased rates, properties that were previously insured are now uninsured and the qualifying rate for everything under the 5-year fixed has risen three times.
So with these massive changes how do you keep up? How do you purchase when the mortgage rules keep changing?
As brokers, we deal with these frustrations every day and the answer unfortunately is not clear!
To give you an idea, a new couple with a baby were purchasing a pre-construction property that they originally bought 5 years ago. When they first signed on the dotted line, rates were in the low 2’s and nobody thought they would ever go up. Now when it came to qualifying with good incomes, excellent credit scores and 20% down, they were shocked to receive rates in the low 3’s. This was hurting their bottom line and worse was going to cost them more every month than the current rent they were paying.
What about the buyer, who last summer put $100 – $200k over asking just to compete in the bidding wars? How do they manage now with negative equity? Where is the responsibility for the banks that lent on these properties or the realtors, who pushed prices higher with forced bidding wars?
While I agree, that things had to change and that the market had to realign, I like you did not see these ridiculous changes under the guise of the foreign buyer affect. Further to this point, with the exchange rates from overseas buyers, their money goes further here in Canada and thus the 15% foreign buyer tax does not even impact them for the most part.
A year after the rules started changing, the markets in some areas of the GTA have dropped 20 – 35%, which has provided the government with the effect they wanted – however they keep hitting us and hard!
Personally, if I had sold in February or March of this year, I could have gotten over $1M for my small bungalow in Newmarket. I recently appraised at $725K – negative sticker shock and I am kicking myself (and my husband for not moving faster) but you cannot go backwards!
So how do you purchase when the mortgage rules keep changing? Not sure but my advice is to stay put – markets will eventually rebound. Are mortgage rates going to continue to climb? All indicators point that way!
What are the current rules so you can see if this makes sense for you?
- Under 5 year fixed term, you incur the insurance premium, even with 20% down
- You cannot get a 30 year amortization, unless you take the 5 year fixed
- Qualifying rate just jumped again from 4.84% to 4.89% – 5pbs can make a huge difference from qualifying to not qualifying
Worried about your situation? Reach out and let’s look at your options – now is not the time to bury your head in the sand and hope it goes away – these new rules and higher rates are here to stay.
Stay tuned – as November is going to bring another round of changes that are going to make us feel the pinch even more!