First-time Homebuyer Rule Changes #realtalk

Through the grapevine, I heard that the Ministry of Finance has some new rules for home purchases in Canada. 6 months ago, I could care less. Now, as a homeowner, anything that has to do with rule changes and the housing market, my ears perk up.

I’m a researcher by nature and by trade so naturally, I spent time investigating and trying to figure out what these new changes meant. The government website explanation was way over my head. So I turned to my favourite news medium- YouTube. I then found this CBC article with a clear diagram which put things into context.

Here’s what I learned:

  1. “As of Oct. 17, more mortgage applications will undergo a “stress test” to evaluate a borrower’s ability to make mortgage payments at a higher interest rate.”

What I think this means:

  • Mortgage lenders will do some more intense calculations to determine if you are able to handle an interest hike.
  • I think this is a good thing. I see people voicing their concerns in the comments but it’s for everyone’s well-being. If you can’t afford higher interest rates, we could have another housing disaster. This is one of the factors of the 2008 financial disaster. Watch The Big Short if you want to understand why/how the US housing market collapsed.

2. People will be able to borrow less money to purchase their house. (People will be able to afford 18% less after October 17th)

Mortgage rules

  • Again, I don’t see this as a bad thing. People may be able to pay their house off faster, but they will have to sacrifice a few things.

3. According to David Larock, president of Integrated Mortgage Planners an “average first-time buyer” is someone with an annual income of $80,000 and a $40,000 down payment

 

  • This must be the Toronto average because I don’t know anyone who fits into this ‘average first-time home buyer’ category.

I understand how people are worried that they won’t be able to afford a house. But if you can’t afford to buy it and maintain it, it’s not worth it. You will be living paycheck to paycheck and worried about finances all the time. It’s better to wait to have more than enough money (more than 10% downpayment in my opinion) and then buy within your means.

Good luck house hunters! You’re in for a ride. 

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