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1. High-Ratio Mortgage Stress Test (17 Oct 2016)

When you require an insured mortgage, i.e. with a down payment of less than 20%, you must qualify for your mortgage using the Bank of Canada qualifying rate regardless of what your actual mortgage rate will be. This was already the case for fixed and variable mortgages with terms between 1 and 4 years but now, it also applies to fixed-rate mortgages of 5 years or longer.

At the moment, that qualifying rate is 4.64% while a lot of mortgage rates are still available in the 2 – 3% range at the moment.

The potential change will affect how much mortgage you will be able to take on. For example, if you qualified for $350K with a 2.5% fixed-rate mortgage of 5 years before the change, you’d now only do so for $278.5K; a 20.43% decrease in home purchasing power.

 

2. First-Time Homebuyer Credit Increase (1 Jan 2017)

To help first-time homebuyers, the Ontario government announced that they would double the refund on the Land Transfer Tax from $2,000 to $4,000. This would mean that the buyers eligible for the rebate would be able to purchase a property at a price of up to $368 000 without paying anything in Land Transfer Tax.

The Ontario Land Transfer Tax is calculated according to different brackets as such:

Purchase Price Bracket Tax Rate
On the first $55K 0.5%
from $55K to 250K 1.0%
from $250K to 400K 1.5%
from S400K to S2 Mil 2.0%
Over $2Mil 2.5%

 

3. SCHL Premium Increase (17 Mar 2017)

CMHC has also increased its homeowner mortgage loan insurance premiums when the down payment is under 35%. This increase in premium varies between 0 and 1.15% of the purchase price according to the table below.

Bear in mind that this premium can be financed as part of the mortgage and so it will not significantly increase your monthly payments. For example, on a$350K mortgage with a 2.5% fixed-rate, you’d pay an additional $6 to 18 per month depending on your Loan-to-Purchase ratio.

Loan-to-Value Ratio Standard Premium (Before) Standard Premium (from March 17, 2017)
Up to and including 65% 0.60% 0.60%
Up to and including 75% 0.75% 1.70%
Up to and including 80% 1.25% 2.40%
Up to and including 85% 1.80% 2.80%
Up to and including 90% 2.40% 3.10%
Up to and including 95% 3.60% 4.00%
90.01% to 95% –
Non-Traditional Down Payment
3.85% 4.50%

 

4. Capital Gains Reporting Rule (3 Oct 2016)

Starting in the 2016 tax year – that must be filed by April 2017 – the sale of a primary residence must be reported to the Canada Revenue Agency, even though all capital gains on it are still tax exempt at this time.

This new rule is designed to prevent foreign property purchasers from claiming a primary residence tax exemption to which they are not entitled.

 


Louis-Philippe Pidgeon