In October 2016, Canadian Federal Finance Minister Bill Morneau announced new mortgage rules. First-time home buyers with mortgages insured by the Canada Mortgage and Housing Corporation will now be undergoing a more severe “stress test”. Beginning October 17, Canadian banks will test the ability of a buyer to repay a loan against a higher five-year rate. Morneau said that the new measures are aimed at reducing high household debt. It will also ensure middle-class families purchase homes that they can afford if interest rates fluctuate in the coming years.
Prior to this announcement, those with less than a 20 percent down payment were required to pass a “stress test” and have insurance backed by the federal government through the CMHC. Those who were able to put down more than 20 percent who were seeking an insured mortgage through a private insurer were not subjected to the “stress test”.
How much can you afford?
While this information may cut your purchasing power and put a squeeze on many home buyers – don’t give up hope!
On December 15, Christy Clark and the BC Government announced a new provincially backed loan program called the BC Home Owner Mortgage and Equity (HOME) Partnership. The BC Government has recognized that for many British Columbians, saving for a down payment is the hardest part of buying a first home. “Not everyone has a parent they can borrow money from to get into the housing marketing, and some need the government’s help,” Clark said. This program will provide first-time home buyers with a loan that is interest-free and payment-free for the first five years. These loans are available for condo, townhouse and detached home purchases. This is very encouraging news for those who have been trying to enter into the real estate market, but have been unable to put together a large enough down payment.