Les affaires magazine said it : a ”bomb” just fell on the Canadian real estate market. The new law mainly touches mortgage loans and affects first-time home buyers more than anyone else. However, these new regulations have been established to protect said home buyers and limit the financial risks they have been taking for decades.
The more surprising portion of the law can be explained like this : ”home buyers who cannot dispose of the required 20% capital outlay when buying a new property will not be granted access to the maximum financing previous buyers were provided with. In fact, the usual mortgage amount will be cut by 20%, which means that, instead of getting a 250 000 dollars loan, they will get 200 000 dollars.”
Of course, such a change will affect first-time home buyers more than owners who will probably get the required 20% from the sale of their current property. That being said, the new regulations are meant to avoid a real estate bubble that could potentially harm the Canadian economy.
The new law touches other aspects of real estate transactions. For example, insured loans (also common within the first-time home buyers community) will now depend on reinforced criteria. ”Every insured loan demand will be submitted to a more severe stress test than the one it used to be subjected to. This simulation is meant to ensure that debt-contracting Canadians can reimburse their mortgage even if the interests rate rises or if their revenue decreases.”
For many experts, the new Canadian real estate regulations seem a little extreme, even if they are intended as a preventive and stabilizing measure. For more details, we suggest you take a look at The Globe and Mail coverage and please consider Genest & Marinacci, Real Estate Brokers, when the time comes to invest in a new property. We’ll let you know all the options that are still available to you based on your personal situation.
Sources : Les affaires, ICI Radio-Canada, The Globe and Mail
Photo credit : Sotheby’s International Realty Canada official Facebook page