Toronto Income Property Newsletter – November 2016

Last month new changes to mortgage regulations were announced by Canadian finance minister Bill Morneau. These changes apply to CMHC insured mortgages only - borrowers with less than a 20% down payment on purchases. The two biggest adjustments were the maximum amortization period dropping to 25 years and all mortgages having to qualify based on a benchmark rate set by the Bank of Canada (currently 4.64% - effectively double the current lending rates). This would mean people will qualify for much lower mortgage amounts than they would have previously, thereby forcing them to pay less. These changes definitely took the industry by surprise and the entire industry as a whole was left trying to determine how these changes would be implemented and how they would be responded to by lenders.

Some non-bank lenders (excluding credit unions), insure pretty most of their mortgages anyway, regardless of how much you have for a down payment. Often the lender covers the premium in these cases. This would mean that all non-bank lenders would have to follow these new regulations on all of their mortgages. Some non-bank lenders who will still be maintaining the previous mortgage regulations on conventional mortgages (those with 20% or greater down payment). This means, 30 year amortization and qualifying based on the contract rate (the rate you are paying) will still be available through some non-bank lenders. These lenders will no longer be insuring these mortgages, which has absolutely no effect on you as a borrower. Major lenders typically do not insure mortgages with 20% or a greater deposit.