Homes and Condo Mississauga

How to buy a home without stress – despite the mortgage stress test


We are well in 2018 and the mortgage test is fully in force. Do you feel the snuff? With the last rate increase from the Bank of Canada and more rumors about 2018, you are not the only one if you are looking for a house and are a bit budget depressed.

But let's take a step back and view the stress test from a different perspective.

Why has the stress test been introduced? There is concern about the amount of debt incurred by Canadians. With a low interest rate rise, many extended their home-buying budget (and mortgage amount!) – especially in the most expensive housing markets in Canada, such as Greater Toronto and Vancouver.

Those who bought homes or renewed mortgages in the last decade have been treated at historically low interest rates, but as we all know, what should come down (or something to that effect). And as we saw twice in 2017 and already in 2018, interest rates are rising.

A little background

The stress test was used to ensure that Canadians will be able to pay their mortgage debt in the light of rising interest rates. The new mortgage stress test requires that mortgage borrowers qualify for the five-year reference value of the Bank of Canada (as of January 17, this is 5.14 percent), or for their contractual mortgage interest plus two percent – whichever is greater.

Important to note: This applies to insured and uninsured borrowers.

This does not mean that you can not afford to buy a house. It only means that home buyers have to reschedule their thoughts and plans in order to get their foot in the door.

Same plan, new approach

You have decided that the ownership of a home is for you. The new mortgage rules require a strategic shift, but ultimately your goal has not changed. You have a few options.

1. Lower your budget, expand your search

Our Housing Market Outlook identified two notable real estate trends that are expected to last until 2018: an increase in the number of condoms and an increase in the number of "moved" buyers.

Condos offer affordability through design – their compact size has a smaller price tag. Shared facilities ensure that you have to pay condom fees, but for a lower price than you would pay in a house with your own house. Often condos can be found on or near transithubs that allow you to survive without owning a car.

If you are not willing to compromise on square footage, you can be a move-over & # 39; buyer in a suburban trajectory. Living in the suburbs or even in a neighboring city often means longer travel times to work, family and friends, shopping and daily shopping. But for those who want the extra bedroom, a backyard and perhaps a swimming pool, it may be worth the trade off.

2. Increase your money

First let's look at the money you might already have. Have you contributed to an RRSP? Aside from the tax benefits to do this, you can borrow up to $ 25,000 from your RRSP with the first-time Home Buyers & # 39; Plan to buy a house. If you buy a house with a partner or someone else who qualifies for a first-time buyer, they can also borrow $ 25,000 for a total of $ 50,000!

Please note that the HBP is essentially an interest-free loan from your pension fund. From the second year after your admission, you must start to re-finance your RRSP with the borrowed amount. You have 15 years to pay back and if you do not, you will be taxed.

Now let's look at the money that you do not have, but could with a bit of careful planning and self-control. Assuming that you are employed (and for most of us there is no way to do this), put as much of each check as possible a high-yield savings account, a tax-free savings account or another low-risk investment vehicle. The amount you can save realistically depends on factors such as your income, normal accounts, debt payments and lifestyle. Some of these are not under control while others can.

Granted, saving takes time, but this is nothing new. With time, willpower and a plan, the ownership of the house is within reach.

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