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Real estate transactions: New rules may reduce buying power

New mortgage rules across the country may may it harder for purchasers to snag their dream homes. In Alberta, as in the rest of Canada, new rules regarding mortgages are expected to reduce buying power by about 21 percent. Real estate transactions may take a hit because of the move.

The Office of the Superintendent of Financial Institutions (OSFI), Canada's bank regulator, wants to increase stress tests for mortgagees, and a well-known site for mortgage comparisons says that will reduce mortgages for which home buyers qualify. House prices will likely decline by about 10 to 20 percent due to the expected reduction in affordability, an expert for the site estimates. Apparently, properties with a value in excess of $1 million would most likely be affected. 

The OSFI is proposing a stress test for buyers who purchase properties with uninsured mortgages or when purchasers lay down more than a 20 percent downpayment. When purchasers have less than that, their mortgages are usually insured by the Canada Mortgage and Housing Corporation (CMHC). Currently, purchasers with a total income of $100,000 or more per year (taking other debts into consideration) can afford a home -- with a 25-year mortgage at 2.84 percent -- of about $726,000. With the new rules in affect, the same purchasers would be able to afford a home valued at about $573,000.

With all the changes regarding real estate transactions, buyers and purchasers would be wise to consult with an Alberta lawyer experienced in real estate law prior to signing any agreements. A lawyer will know what the current trends indicate and how new rules and regulations might affect buying and selling power. In this economic climate having a lawyer's advice when making such large financial transactions is certainly in a buyer's or seller's best interests.

Source:, "Proposed Mortgage Rules Will Reduce Your Home-Buying Power By 21%: Report", Daniel Tencer, Accessed on Oct. 13, 2017

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