In an effort to slow down our very zippy local housing market the government has proposed some changes to how we buy or finance property here in Ontario.
As of mid April they are proposing the following:
1/ If you are a first time home buyer you will have to qualify for your first loan based on a 5 year fixed term rate. Currently mortgage companies qualify buyers on a 3 year fixed term. Once qualified you can then generally choose the term of your choice. Since there is not a huge difference between 3 and 5 year rates at this particular moment that will not be terribly painful for most folks. This is a very good thing. When rates rise it will help to ensure that more people will be able to handle a larger mortgage payment.
2/ For sellers doing take-out mortgages on their homes they will only be able to max out on a loan up to 90% of their home’s value. Very smart idea.
3/ The government is proposing a way to slow down speculators by requiring them to put down 20% on properties. They are apparently targeting the condo flipping market. This is the same group that got into trouble back in the 80’s when thousands of condo deals didn’t close when the gov’t came down with a speculation tax. This had a radical effect on the Toronto market. Most builders look for 20% down to hold a unit for the 2 to 3 years it takes to get a building up so this should only affect those with fairly dicey deals anyway.
They are stating that this will not affect actual investors who buy multi unit properties to invest in and hold. In other words professional landlords rather than speculativ flippers.
So it will be interesting to see how this shapes up in the next few weeks. Check back again soon for an update.