As you may or may not know, the mortgage financing rules in Canada are potentially changing and these changes could be implemented very soon! So, we wanted to know what this meant to a new home buyer….
First, what are the speculated changes coming down the pipe?
1. Changing the maximum amortization period from 30 to 25 years. (If this amortization period is to decrease, it will be the second time in a matter of a year that the maximum period has been reduced, as it was reduced from 35 to 30 years in April of 2011.)
2. Changing the minimum down payment required on new loans. (The minimum down payment was increased from 0% to 5% in October of 2008.)
How do these changes effect a new home buyer?
The implications of these two financing rule changes could be challenging for those trying to break into the real estate market or trying to maneuver within it.
If the maximum amortization period is decreased from 30 to 25 years it will require home buyers to have a higher income in order to qualify for the same mortgage amount they would have been approved for under a 30 year amortization period. For example, under this potential change home buyers will require an additional $10,000 (approximately) in annual income in order to qualify for the 95% mortgage, based on a purchase price of $489,900, as compared to a 30 year amortization period.
The ramifications of an increase in the required down payment is much easier to understand! The higher the percentage required, the more money a home buyer must have up front in order to be considered for a mortgage.
Now that we have considered and understand the potential changes in financing rules, what is a home buyer to do?
If you are in the market for a new home, or are even just considering a move, do not delay your decision to buy NOW! By securing your new home now, prior to any change in financing rules, you will protect yourself against the increase in required down payment, as well as the reduced amortization period. (This could equate to a savings of several tens of thousands of dollars, depending on what type of home you are in the market to buy.) In addition, mortgage rates are at a historical low.
These financing rules and predicted changes can be very confusing to many of us out there. Do not hesitate to pop into our Display Centre, where our professional Sales Staff can connect you with a financing specialist who can provide you with more information on the changes, as well as look into how they may impact you directly! Be sure to visit us at 3019 Dornier Road in Westhills!
In consideration of these potentially imminent financing changes AND the historically low interest rates, this really is the absolute BEST time to purchase your new home….
Find Westhills, find home!
Your Westhills Team