Proposed Mortgage Rules Could Make It Harder To Buy Condos

In an effort to tighten Mortgage lending guidelines in Canada, the federal government is considering a change that would make it more difficult to get a loan to purchase condominiums.

When applying for mortgage to purchase a condominium, lenders also have to take into the maintenance fees into consideration as an expense.  Current regulations calculate only 50% of the maintenance fees as an expense, however, the new proposed change would take 100% of the maintenance fees.  This could add approximately $150-$300 to an applicants expenses every month, which calculates to approximately $40,000 in purchase price according to Brad J Lamb.

In addition, there is talk about dropping the maximum amortization from 35 years to 30 years (It was 40 years just a couple of years ago), which could have further impact on affordability for condo buyers.

One has to wonder if the government and Bank of Canada are being TOO protective with the new changes.  We have spoken at length about how Canada’s banking rules on amortization, equity and third part insurance have been instrumental in the country “riding the recession”, but these changes could price a lot of people out of the market.

Brian Persaud (@BrianPersaud) of Rogers TV’s Inside Real Estate joked on his Twitter account that developers will need to react to the change and ensure that their maintenance fees are low so that purchasers will be able to buy, stating “bye bye theatre rooms….hello chess nights!”  We’re not sure it’s that drastic, but it did make us chuckle!v