By: Addy Saeed

Effects and victims of the new mortgage rules coming October 17, 2016

Tags: mortgage rules, effects, toronto real estate

I had written about the new mortgage rules that are coming to the real estate market with the introduction of new rules from Ottawa.  It's something that has been on my mind and I wanted to go through and see who will be the intended and uninteded victims of these changes.  Following are the groups that need to review their finances and come up with plans on how to overcome these new obstacles that have been placed with the new rules.

First time home buyers with less than 20% down payment
One of the main set backs from the new rules coming into play is that any buyers that are looking to purchase a property with less than 20% down payment are going to be subjected to more stringent rules where their incomes have to qualify based on the posted mortgage rate rather than the discounted which is significantly reduce their purchase price.  This will create a push for any buyer that doesn't have less than 20% down payment availalbe to push the market and try to purchase and firm up their deal before the October 14 deadline so they don't have to be subjected to the more stringent rules.  It will be interesting to see how the October numbers fair based on September and the balance of the year.

The real estate run up
Anytime in the past when there has been a change, there has been a run up in the market of buyers looking to finalize their purchases before the deadline.  The HST change, the land transfer tax, the mortgage rules changes, all created a frenzy for buyers to clamp down their purchases with the past rules to avoid paying extra or being subjected to restrictions.  There will be a run up this time too but since the deadlines were quick, the impact might not be as severe.

The real estate ladder
The real estate transactions in any market are based on the bottom of the market being fed with new buyers.  The move seller's make horizontaly or vertically are all fed by buyers constantly entering the market place and purchasing the lower priced proeprties.  Toronto has been doing amazing in terms of real estate because we've always had a lot of people immigrating and purchasing the first time homes hence helping move up and sideways sellers.  The new rules restrict the entry of new buyers into the marketplace with less than 20% downpayment and anyone looking to sell their property in the near future will see it effect their purchase as the bottom of the barrel has just sprung a leak.  

Investors with current holdings and pending purchases
One of the cornerstone of the changes has been the change in taxation laws to stop international buyers to declare their property in Canada as a primary residence which will expose any owners in the marketplace to higher capital gain taxes.  This also means that any purchasers with pending agreements will be exposed to increased taxes if they own more that one property, have purchases pending on any investment properties or are selling an investment property that is closing after the deadline of October 17.  

A point worth noting is that capital gains tax isn't applicable till the property is sold so it would be best to talk to a tax accountant and review options on how it would be best to deal with your tax situation.

If you would like more information about the mortgage changes or would like to discuss how I can help you with your real estate needs, please feel free to leave a comment below or connect with me via the contact page.