So today is January 17th and the Government of Canada announced three new mortgage rules.
- No more 35 year amortizations (for people with less than 20% down)
- Maximum amount of re-finance is 85% of home value
- Government will not insure HELOCs
Let’s look at the big change: No More 35 Year Amortizations
This change will have the most profound impact on sellers and buyers over the next 60 days.
LIST ASAP: if you are thinking about selling and were planning on listing in March, perhaps think again. A large chunk of buyers (the ones with less than 20% down) will be able to afford less of a mortgage starting on March 18th. This means that the pool of buyers for your home, just shrank! If you are thinking about listing. Then it could be wise to do it ASAP in order to make sure your pool of buyers doesn’t shrink.
PRICE RIGHT!: This might not be the time “test the market with your dream price”. There could be a flood of listings coming onto the market in order to sell before the mortgage rules change. The homes priced right will sell while buyers can still qualify for 35 year mortgages. The homes that don’t sell face a smaller pool of buyers after March 18th.
WAIT? It’s hard to have an good opinion for buyers. Here are some facts and you can make up your own mind: Home prices are at an all time high. There might be a lot of people trying to buy before the rules take affect (these are the people who really want to pay a high price for a home and pay interest for 35 years). When a lot of people buy, home prices usually go up (even higher).
PRICES COMING DOWN? No one can predict that. Some people sit on the fence for years and waiting for a crash while prices increase 5-10% a year. Some people buy their dream home regardless of price. Some real estate professionals say “better buy now or be priced out forever”. Once the rules change, who knows what will happen to prices or demand. Although the math says that people can afford less home when they can only choose a 30 year amort vs a 35 year amort, this does not guarantee that prices will drop.
So there seems to be more question marks for Buyers than for Sellers.
It’s going to be an interesting spring home market in Canada!
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