Published
Jul 24, 2018

Real estate jobs

Jul 24, 2018

Recent changes in Canada could make it harder for you to get a mortgage. If you don't know about these changes, you might not know how they affect you specifically.

Fortunately, the new mortgage rules are not all that difficult to understand.

Keep reading and I'll show you what these new changes are and what they're designed to do. Once you've finished, you'll understand whether you'll be affected by the changes and what you can do to deal with these new rules, if you are affected by them.

Let's begin!

What Are the Changes?

The changes are designed to affect people who have and don't have uninsured mortgages. An uninsured mortgage is essentially mortgage where someone hasn't put 20% (or more) deposit down.

This had lead to changes in terms of what it takes to qualify for a mortgage. People will now need to qualify at the Bank of Canada benchmark rate. This is currently at 4.55%.

Additionally, you'll also have to qualify for a mortgage that is 2% higher than your current contracted rate. So, suppose you're approved for a mortgage at 3%, you'll also need to qualify for a mortgage that is at 5%.

This extra percentage acts like a 'stress test.' It's designed to identify whether the borrower can pay back the mortgage, even if there is an increase in interest rates. This can help create financial stability in the country.

How Do These Changes Affect People?

If you're a first-time buyer, this is going to likely affect you the most.

This is because you probably don't have the financial resources required to invest in a mortgage with a higher interest rate. Banks may no longer see you as someone who 'qualifies' once the stress test is applied, especially if don't have any existing assets.

Even if you're not a first-time buyer, this change could still affect you of course.

The key thing here is the increase in interest rates that deem whether someone qualifies. Therefore, if you don't have a lot of money saved up, it will be hard to buy a home that is more expensive than what your currently own.

The bank might take a look at your income and savings and state you don't qualify for a mortgage, at the higher rates. If you don't have the deposit, you're going to face an even stricter mortgage process.

This is especially the case if you don't have money left over to cover the deposit even after the sale of your home.

What Can Be Done to Deal with These Changes?

Unfortunately, you can't really get around these rules. So you'll need to approach things in a practical manner.

One thing you can do is save up money. This might mean you take on less debt and live a more frugal lifestyle for an extended period of time. This can be a hard thing to do, but it can also be one of the best ways to deal with this situation.

The other option is that you find ways to increase your income. This approach can work a lot faster than saving money. But it can take up a lot more of your time too.

You might be able to increase your income by working more hours. Though there are only so many more hours you can work. You may, therefore, want to look into finding jobs that are higher paying.

This process can take time, but ultimately, it can provide the best outcome. Because at the end of everything you'll find yourself in a higher paying job and with and with a home you can afford. If you need help finding a job, think about creating a job alert, so you're notified whenever there's a new opportunity.

There's also the option of starting a business. This option is not suited to everyone. But it can be one of the fastest ways to come up with the money required for a deposit.

Of course, you also risk losing money when starting a business. This is money that could have been put forward for a deposit.

Increasing the Value of Your Existing Home

If you own your own home, you might want to think about renovating it so that you can sell it for more. This can help free up some money for the deposit.

You might also want to find someone who can help you sell it online, thereby increasing the odds you find a buyer willing to pay high prices. If you'd like to discover more about marketing your home online, you can ask a company like this one.

Seeking out Cheaper Homes

The changes mean that you're going to experience reduced buying power. Because of this, you may have to think about finding cheaper homes.

Such homes might include those outside of the larger cities. You may need to face a longer commute when purchasing such homes. But at the very least you will be able to become a homeowner.

Do You Understand the New Mortgage Rules?

Buying a home is the dream of many people. But the new mortgage rules for people living in Canada might make things a bit tougher for people.

In this post, we've reviewed how these new mortgage rules affect people and what can be done to deal with them. You might need to seek out cheaper homes so that it's easier to convince the banks you're able to deal with the 'stress test.'

It's important to remember that whilst these rules make it harder to get a home, they don't make it impossible. It might take a bit longer to buy a home but there are things you can do to deal with the situation.

Ultimately, the best way to deal with this problem is to find a way to increase your income. Though this is a challenging thing to do, it can help take care of the problems you might face to buy a property in Canada.

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