Markham Real Estate Today with Asif Khan

Recently there has been alot of talk about the new mortgage rules introduced by the government.  We've heard through the media that these rules will slow down the incredibly hot real estate market, that the end of the hay days are here for sellers, first time buyers are being squeezed out, etc.  Well, this is all muchado about nothing!  Let's take a closer look at the three new changes:

1.  Investment Properties - Investors are now required to have 20% downpayment rather than 5%.  In the past most banks were insisting on 15 - 30% on investment properties, there were a few that were funding deals with less downpayment.  There will be no significant impact on the sales of these properties.  It is difficult to make a significant profit by only investing 5 or 10% in a property.  The key to making money in investment properties is to have equity in your property, which in turn allows you to make a return through rental income and appreciation.  There have been some in the media that have confused the investment properties with principal residences.  You can still put down 5% if the property will be your principal residence. 

2. Purchasers must now qualify on a five-year fixed rate.  Again, this rule will not be detrimental to home buyers.  Most banks were qualifying on a three-year fixed in the past.  Some were using the five-year rates.  The reason Canada has the highest rated banking system in the world - as opposed to the United States being #43 - is because of our conservative lending policies.  The difference between qualifying purchasers on a five year vs. three year rate would mean that instead of being approved for a $500,000 home, you may only be approved to purchase a $480,000 home. 

3.  Refinancing - Home Owners can refinance up to 90% of the home. Previously, some financial institutions were allowing refinancing up to 95% of the value of the home, however most major banks were already using the 90% benchmark for refinancing.  Having a minimum of 10% equity in our home will prevent us from being put in the same credit crunch that saw the American market crumble. 

As you see, the changes are minor in nature.  They will not affect home buyers much, if at all.  Previously, home buyers were not aware that these rules even existed, therefore now that they have been exposed in the media, the attention seems to scare many.  Everything will continue as is, and the market will continue to roll along.  Real Estate is still the safest investment and if anything, with these rules, it just became that much safer!

If you have any questions, or would like more information on the market in your area, please email me - info@asifkhan.ca.