Number of clients have asked me about changes that are to happen on July 1st, 2010 and how will they be affected when buying or selling their home; Even the (great)number of Realtors were in the limbo when asked the same question;
Answer was: NOT MUCH, since taxes are included on resale homes. In some ocassions, HST will be applied , and that has been explained in my previous blog. However, something greater has happened back in April, that went ( for 90% of potential buyers ) under the radar. Banks have made the change in the way they will qualify future Buyers and number of deals did not complete just because of it;
If before April 19, you have qualified for purchase of 400,000 home, today, you might qualify for 370,000 , although nothing changed in your income, spending habits, etc..
So, what happened ?
This article might shed some light on important changes that have affected our buying power
Summary of changes:
CHANGE 1: Qualifications Borrowers must qualify for a five-year fixed-rate mortgage, even if they opt for a lower variable rate. Previously buyers had to qualify for the higher of a three-year fixed rate or a variable-rate mortgage.
A buyer of a $337,000 home will require $9,200 more in annual income to qualify. A buyer of a $200,000 home will need to earn $5,400 more.
CHANGE 2: Refinancing Lower the maximum amount a homeowner can withdraw when refinancing a mortgage, to 90 per cent from 95 per cent of the value of the property.
The effect? Limited, although it could dampen the purchase of some large consumer goods bought through mortgage refinancing.
CHANGE 3: Speculation Increase the required down payment to 20 per cent from 5 per cent for insured mortgages obtained for purchasing speculative housing investments not occupied by the owner.
About 5 to 15 per cent of mortgage deals will be affected in a "significant" manner, said Toronto-Dominion Bank, which predicts the rule will "significantly reduce the risk of speculation driving the market forward."