What a difference 24 hours makes in the world of real estate. With a lot of public outcry regarding foreign ownership contributing to crazy house prices, record low interest rates continuing and debt burden, the government has stepped in to try to regulate and cool the market.
The new rules are unfolding and to be honest result in as many questions as answers but I try to explain in today’s podcast.
Disclaimer: I am not a tax expert or lawyer so it is general information being provided as well as comments by those in the real estate business.
Existing mortgages and renewals are not affected and the changes are being phased in (but really quickly during this month and next) but they seem to be primarily about:
- Insured mortgages (both individual insured and lender portfolio insured mortgages)
- Capital gain exemption on the principal residence
The stress test now being applied will be using the Bank of Canada rate not the actual rate you are getting and this will affect how much you can borrow if you need an insured mortgage. Question: Will it later be applied to non insured mortgages (where 20% or more downpayment is being applied). This is still not clear.
Taxing foreign investors is also not clear as there is talk that it applies to either when a non-resident purchases or sells a property. Some say it is when it was purchased while there is talk about it being both when it was purchased and when it was sold. Either way this loophole is for those profiting from increased value and not living here.
Take a listen.