Major Changes in Mortgage Qualifying

[MillerTime GFG]

Originally Posted by Leeman4Gilmour

I think this piece of information is important. I would think a lot (most?) people fall into the high ratio category. This change just affects the rest.

A lot of people are under the high ratio umbrella for sure, and it will impact them as well. They will have to qualify at the benchmark rate (or whatever it's going to be) even if going for a 5-year fixed.

See the CBC example a couple posts up, as that is a high-ratio deal as well.

[The Fonz]

Am I understanding this correctly - under the new rules, if you sell your primary place of residence and realize $45k in capital gains, you will now be taxed on those gains?

[CroFlames]

Originally Posted by The Fonz

Am I understanding this correctly - under the new rules, if you sell your primary place of residence and realize $45k in capital gains, you will now be taxed on those gains?

That's horse#### if you ask me. You shouldn't be taxed on gains from selling your primary residence.

[Fuzz]

Originally Posted by The Fonz

Am I understanding this correctly - under the new rules, if you sell your primary place of residence and realize $45k in capital gains, you will now be taxed on those gains?

No, they are just saying you have to report it on your return. I think to stop foreign owners from using the loophole. They aren't doing away with it, just making you report it. From what I can tell, anyway.

The federal government said the change will ensure that the principal residence exemption is used only by Canadian residents and that families designate just one property as their principal residence in a given year.
Previously, homeowners did not have to report the sale of properties they designated as their principal residences. There had been widespread abuse of the principal residence exemption by foreign buyers who claimed residency either for themselves or their spouses or children simply in order to avoid paying taxes on real estate sales.

[Shazam]

Is there a matching slip required from a lawyer or bank or someone else involved in the transaction?

Otherwise that self reporting is useless.

[Leondros]

Originally Posted by Shazam

Is there a matching slip required from a lawyer or bank or someone else involved in the transaction?

Otherwise that self reporting is useless.

CRA has some other ways to audit this rather than relying on a matching slip.

[IliketoPuck]

I haven't seen anyone mention the impact of these new policies on renewals? Is there one?

[Shazam]

Originally Posted by Leondros

CRA has some other ways to audit this rather than relying on a matching slip.

Like what?

[MillerTime GFG]

Originally Posted by IliketoPuck

I haven't seen anyone mention the impact of these new policies on renewals? Is there one?

Straight renewals will be fine, as they're existing insured deals. It would be catastrophic if they impacted those. I'm thinking refinances may be a different story however.

Still a lot of details needing to emerge.

[Kavvy]

Sorry I read the thread, but still confused.

If you have 25% down, are we saying that most big banks will require CMCH insurance?

40% down?

[llwhiteoutll]

Originally Posted by Kavvy

Sorry I read the thread, but still confused.

If you have 25% down, are we saying that most big banks will require CMCH insurance?

40% down?

No, you'd still be CMHC exempt. The lender can always choose to insure 20%+ DP mortgages.

At least this is what was explained to me

[Cecil Terwilliger]

Originally Posted by Kavvy

Sorry I read the thread, but still confused.

If you have 25% down, are we saying that most big banks will require CMCH insurance?

40% down?

Basically it is just harder to qualify for Insured mortgages. Down payment requirements haven't changed.

Originally Posted by llwhiteoutll

No, you'd still be CMHC exempt. The lender can always choose to insure 20%+ DP mortgages.

At least this is what was explained to me

That's right, a lender must insure purchases with less than 20% down payments. But if they want, they can insure mortgages even when more than 20% is put down.

The main change being discussed is that when qualifying for a mortgage with less than 20% down, a benchmark rate will be used for qualifying purposes. The current benchmark rate used for variable mortgage qualification is 4.64. This is around 2% higher than a current 5 year fixed rate, meaning that qualifying will be more difficult.

The idea is that new buyers will be less susceptible to rate increases as there is currently a great deal of concern that any rate hikes could mean financial hardship or worse for a lot of Canadians.

[You Need a Thneed]

If we want to switch lenders when our mortgage comes up for renewal, could this affect us?

We are up for renewal next spring, with 22.5 years left on the original 25. We ported the remaining portion of our term from our old house to our new house. We would like to switch lenders, as long as it makes sense.

[GGG]

They made such a mess of the market when it was booming and the affordability solution was to increase term and decrease or eliminate down payments. It essentially stimulated and over stimulated market driving prices higher.

It's good see they are undoing this slowly

[burn_this_city]

If I made an offer on the weekend and already started the mortgage process am I affected?

[MillerTime GFG]

Originally Posted by You Need a Thneed

If we want to switch lenders when our mortgage comes up for renewal, could this affect us?

We are up for renewal next spring, with 22.5 years left on the original 25. We ported the remaining portion of our term from our old house to our new house. We would like to switch lenders, as long as it makes sense.

You will be fine to switch lenders, as you have an existing file with the insurer. I'm waiting for confirmation on what will happen if someone in your situation wanted to refinance though.

[MillerTime GFG]

Originally Posted by burn_this_city

If I made an offer on the weekend and already started the mortgage process am I affected?

As long as you are approved prior to the 17th, you'll be fine.

[MillerTime GFG]

A lot of unhappy people in the industry waking up this morning, myself included, as there is still so much uncertainty as to exactly how these rules are going to be implemented. Even the lending institutions are in the dark and can only say they will confirm when they know more. Quote from one of the most respected BDM's in the industry: "This action was swift and without industry consultation."

Not only is there so much uncertainty, but they have given only two weeks for this to be implemented. You can agree or disagree with this decision, but there's little doubt in my mind that there should have been a longer period of time for consumers/brokers/realtors/lenders to get acclimatized.

[Hockeyguy15]

In theory I'm not against it, it's smart to see if people can handle a rate jump when you qualify them. I guess it all depends on the details of the plan though.

[Cecil Terwilliger]

Originally Posted by MillerTime GFG

A lot of unhappy people in the industry waking up this morning, myself included, as there is still so much uncertainty as to exactly how these rules are going to be implemented. Even the lending institutions are in the dark and can only say they will confirm when they know more. Quote from one of the most respected BDM's in the industry: "This action was swift and without industry consultation."

Not only is there so much uncertainty, but they have given only two weeks for this to be implemented. You can agree or disagree with this decision, but there's little doubt in my mind that there should have been a longer period of time for consumers/brokers/realtors/lenders to get acclimatized.

The quick timing was certainly a shock. Usually the deadline for implementation of these changes are months, not days.