Confused by Numerous Changes To Home Buying Requirements?
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This article gives a dated summary of the implemented changes over the years.
CREA, your Canadian Real Estate Association, appeared before a House of Commons Standing Committee on Finance tasked with studying the Canadian real estate market and home ownership, mid February.
They reminded the federal government about the profession’s recommendations on the Home Buyer’s Plan and asked MPs to carefully consider the overall impact of past announcements on the housing market before introducing new initiatives.
Although mentioned in multiple political party election platforms in 2015, the federal government has yet to follow through with making changes to the Home Buyers’ Plan (HBP) program. CREA intends to continue to work with the government to ensure the HBP remains a valuable program for all Canadians.
CREA’s Recommendations for the Home Buyers’ Plan
- For the federal government to index the Home Buyer’s Plan to inflation to preserve its purchasing power and continue to help first-time home buyers attain home ownership;
- Allow Canadians to benefit from the Home Buyers’ Plan more than once to maintain home ownership if they face sudden life changes such as a job relocation, the death of a spouse, a marital breakdown or the decision to accommodate an elderly family member.
Federal Government Announcements Impacting the Housing Market
In the last eight years, the federal government implemented six rounds of changes to tighten the rules for new government-backed insured mortgages and contain risks in the housing market. Here is a summary from CREA:[bctt tweet=”Government Changes To Home Buying Requirements #BC” username=”jwsrealestate”]
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1. Effective October 2008:
- Maximum amortization period of 35 years
- Minimum down payment of 5%
- Consistent minimum credit score requirement
- New loan documentation standards
2. Effective April 2010:
- Debt servicing standards calculated based on the higher of the mortgage contract rate or Bank of Canada conventional five-year fixed posted mortgage rate, for mortgages with variable interest rates or fixed interest rates with terms less than five years
- Maximum refinancing limited to 90% of the property value
- Minimum down payment of 20% on non-owner-occupied investment properties.
3. Effective March 2011:
- Maximum amortization period of 30 years
- Maximum refinancing limited to 85% of the property value
- Withdrawal of government guarantees on low-loan-to-value non-amortizing secured lines of credit (effective April 2011)
4. Effective July 2012:
- Maximum amortization period of 25 years
- Maximum refinancing limited to 80% of the property value
- Maximum gross debt service ratio at 39% and the maximum total debt service ratio at 44%
- Maximum purchase price of less than $1 million
5. Effective February 2016:
- Minimum down payment of 10% for the portion of a house price above $500,000.
6. Effective October 2016:
- Requiring all insured mortgages to qualify under maximum debt-servicing standards based on the higher of the mortgage contract rate or Bank of Canada conventional five-year fixed posted mortgage rate
- Standardizing eligibility criteria for high and low-ratio insured mortgages (effective November 2016)
7. Balancing Risk (February 2017):
- A consultation process on lender risk sharing for government-backed insured mortgages
- Property Transfer Tax exemption threshold for 1st time home buyers announced and the threshold increased from $475,000 to $500,000 on February 22, 2017.
CREA appreciates this government’s attention to the needs of first-time home buyers. To keep pace with the dynamic real estate market and ensure that home buyers aren’t left behind, the Association strongly believes that this threshold—and all others related to the Property Transfer Tax—should be indexed, with adjustments made annually.
8. CMHC Premium Increases
- Announced February 2014 – effective May 1, 2014
- Announced April 2015 – effective June 1, 2015
- Announced January 2017 – effective March 17, 2017
CREA argued, these measures were implemented over a short period of time and their full impacts have yet to be determined. CREA recommended the government take a pause to fully evaluate the cumulative impact of the recent changes before looking at implementing additional measures. As well, CREA offered their expertise to inform the government’s policy decisions.
Gary Simonsen, Chief Executive Officer of CREA said:
We are prepared to share analysis of local housing market trends and apply our knowledge and data to help the government policy makers at all levels better understand how changes to housing market regulations may affect communities across Canada.
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