Well, as many of you may know, their’s been some recent changes to the mortgage rules in Canada. I thought it would help if I created a timeline that highlights the changes, and how it will effect home buyers.

Lets start in 2008 when during this time, lending and mortgages were quite easy to secure. I hear it time and time again from my clients “I don’t remember having to do all this the first time I got a mortgage”. People had access to 100% financing, 40 year amortizations, cash back mortgages, 95% refinancing, 5% down payment required for rental properties, and qualifications for FIXED terms under 5 years and VARIABLE mortgages at discounted contract rate. Not to mention, NO LIMIT for your GROSS DEBT SERVICING (GDS) if you had strong enough credit.

In July of 2008, 100% financing ended, amortization was reduced from 40 to 35 years, and it was required to have strong credit to be approved for a AAA rate/mortgage product. Total Debt Servicing (TDS) could only be maxed out to 45%.

APRIL 2010

In April 2010, a Variable Rate Mortgages was now qualified at the 5-year Bank of Canada’s posted rate (currently 4.64%). Same went for 1-4 year Fixed Term Mortgages. The 5% down for rental/investment properties was changed to 20%, and in March of 2011, 35-year Amortization were reduced to 30 years for conventional mortgages. Refinancing fell to 85% from 90%, and the public no longer had access to mortgage insurance on secured lines of credit.

JULY 2012

In July of 2012, the amortization period was reduced from 30 years to 25 years for any High Ratio Mortgages (less than 20% down). Refinancing was reduced to 80% from 85%, and a Self Employed person had a much more difficult time securing financing due to the cancellation of True Equity Lending. Banks banned mortgage insurance on any million dollar purchases, forcing the buyer to put at least 20% down on any property over million dollars. Cash back mortgages were eliminated, the federal guidelines made it a requirement to put at least 5% down, and the ‘good ol’ FLEX DOWN mortgage products was introduced.

In early 2014, default insurance premiums were increased for anyone putting less than 20% down.

At the start of 2016, our minimum down payment rules changed to:

• Up to $500K – 5%
• Up to $1MM – 5% for the first $500K and 10% up to $1MM
• $1MM and greater requires 20% down (no mortgage insurance available)

Also, you were exempt from paying BC Property Transfer Tax on NEW BUILDS regardless if one was a 1st time home buyer, as long as the purchase price was less than, or equal to $750,000. This rule was created to help develop the pre-sale market, which our government hoped would create new jobs, and stimulate our economy.

In July, our Government introduced a foreign tax, which stated  an ADDITIONAL 15% Property Transfer Tax would be applied for all non-residents, or corporations not incorporated in Canada, and purchasing property in BC.

Then in October, all INSURED mortgages with less than 20% down had to qualify at the Bank of Canada 5 year posted rate (currently 4.64%).

And finally, duh duh duh, on November 30th, Portfolio Insured mortgages (monoline lenders) greater than 20% down have new conditions with regulations requiring them to qualify all mortgages at the Bank of Canada 5 year posted rate(currently 4.64%), max purchase price of $1,000,000 and must be owner occupied. This is great news for the major banks like Scotia, TD, etc.

In summery: 

New homeowners are effected by the following:

1. You will qualify for a lesser amount than prior to November 30th.

2. Capital Gains can only be claimed once per year. This was slow down the recent flipping of assignments to avoid property transfer tax from investors.

If you would like to stay up-to-date on all the changes with the mortgage rules, visit the Dominion Lending Centres “new rules” page by clicking HERE, or visit the BC Housing website, which has tons of great information on it. And, as always, I’m only a call or email away from answering any mortgage questions you may have.

Best,

-D