Why realtors love Canada’s new mortgage rules

If you're planning to buy a house, Canada’s financial regulators recently revealed new guidelines for buying and selling homes that many applaud. But what are they? How will they affect you?

Since 2012, the Office of the Superintendent of Financial Institutions (OFSI) has been working on a new set of mortgage guidelines. The new policies issue new protocols that dictate what banks, mortgage lenders and borrowers must do to qualify for government-backed loans. The overall goal is to place tighter regulations that, in turn, reduce the number of defaults and foreclosures.

As of May 30, 2014, the Canadian Mortgage and Housing Corporation (CMHC) will no longer insure purchases by self-employed workers without verification from a third party. Keep in mind that the self-employed are not losing their mortgage loans, but they must provide verifiable proof of income to continue.

The CMHC will also no longer offer insurance for Canadians who want to buy a second property.

Overall, real estate professionals seem to be happy with the new set of guidelines for a few key reasons.

• Small impact --The new guidelines apply to just an estimated three per cent of the units the CMHC insures. This means the new guidelines are not likely to cause a major ripple in the housing market which could harm both buyers and sellers.
• Avoiding speculation --The discontinuing of second property mortgages is also refreshing for real estate professionals. Many believe this was done to discourage real estate speculation. If left unchecked, rampant speculation could lead to a housing bubble similar to what the United States suffered.
• It was expected --No surprises here. The regulations had been in the works since 2012 and follow the CMHC’s core mandate to support stability in the housing market. The regulations come on the heels of tighter mortgage regulations across Canadian agencies.
• Reducing risk --The new rules prevent Canadian home buyers and mortgage lenders from overextending. At their core, the new guidelines encourage mortgage insurers to keep banks accountable.
• Transparency --With an increase in data disclosures, real estate professionals from every sector believe increased transparency and oversight is a good measure to protect the country’s housing market.

Any fears that the housing market would cool based on these regulations seem to be unfounded. The number of houses sold in Canada grew 10.6 per cent over the past year, a sure sign of a continued, lively market for both buyers and sellers.

Speak to a qualified lender in your area to learn more about the latest Canadian mortgage rules and what they mean for your dream of home ownership.