Michelle Lapierre
New Changes - Impact on Buying Power
10/10/2016
Everyone in the real estate industry is discussing the impact of the changes rolled out Monday by the Minister of Finance. Impacts on property values is purely speculative at this point, but we are getting a better understanding of the impact on buyer purchasing power. Effective Oct. 17th buyers with less than 20% down payment will be qualifying at 4.64% instead of the 5 year fixed rate you actually receive.
If I simplify calculations and look at buyers with great credit, no debts and buying with 5% down and no condo fee, the changes to purchasing power are significant; even more than I initially calculated.
Assuming $100/month heating cost and $200/month property taxes, a buyer with a $50,000 income could buy to a maximum of approximately $300,000 at 2.44% and $235,000 at 4.64%. They lose $55,000 of purchasing power.
Assuming $125/month heating cost and $300/month property taxes, a buyer with a $90,000 income could buy to a maximum of approximately $570,000 at 2.44% and $450,000 at 4.64%. They lose $120,000 of purchasing power.
If you were previously pre-approved or selling to re-purchase at a higher price, you should speak to a mortgage professional about how these changes will impact you given your specific situation.
