Mortgage Misinformation

Ever since the Federal government announced a new set of mortgage rules in February, misinformation has been spreading like wildfire. Don’t buy the hype – acquiring a mortgage is still possible!

Below are a few mortgage myths, debunked:

1. You can still purchase a property with 5% down.
While the government did change the rules regarding 5% down payments, the changes only affected property investors. If you’re a first-time buyer – or if you’re looking to move into another residence that you plan to occupy – you can still buy a home for 5% down. You can even buy a home with rental units in it for 5% down, as long as you plan to live there too.

2. You can still purchase a vacation or second property with 5% down.
If you have your eye on a new cottage or second home, those are also exempt from the new down payment changes. Unless you plan to rent it out when you’re not living there, you can still purchase a second home for 5% down. The only situation that falls under the new rules – where you’ll be required to put 20% down – is if you’re purchasing a property solely for investment purposes. This is to prevent real estate speculators from artificially inflating the market.

3. You can still qualify for a mortgage.
While the government did implement a rule to reign in over-zealous first-time buyers, the intention was noble. To prevent first-time buyers from getting in over their heads, the government is now making it mandatory for lenders to qualify them on the five-year fixed rate – even if they’re choosing a lower variable-rate mortgage. This is because, while variable rate mortgages may initially seem lower, they change according to the Bank of Canada’s Prime lending rate – and in the coming year or two, the government has made it quite clear that this rate is going to increase. By qualifying borrowers at the higher rate, lenders are ensuring homebuyers can withstand the increases.