News is coming out that CMHC may not change the 5% down rule, but may change how much of your income we can use to service the mortgage. This change will be equally onerous and destructive to first-time buyers since I don’t believe the Government can will prices to fall, therefore, buyers will remain renters until/unless their incomes rise and/or prices do (eventually) drop (which takes a long, long time).
Let’s look at what you can do today if you make $100,000, you buy a condo, with $2200/year taxes and $500 maintenance fees. Hypothetical but it’ll give you a good enough sense of the changes.
Today, that borrower can take on debt that is 4.8x their income. This is at the 39/44 ratios limit. This means 39% of this borrowers income goes towards servicing the mortgage and other related maintenance/taxes debt.
If/when those changes move to 35%, that borrower can borrow 4.2x income.
If/when those changes move to 32%, then we’re down to 3.8x income.
So a $100,000 borrower today can borrow $480,000.
Or, $420,000 when these changes happen to 35% OR $386,000 when they change to 32%.
Notice I said WHEN not IF. Clearly the CMHC and Evan Siddall are scheming to make the market more difficult to get into and maybe use their willpower to bring prices down.
Clearly I don’t think that’s going to happen and if it does it’ll take a lot longer. Why? Because people who want to buy are smart and already I can tell you that a lot of them will simply add co-signers, usually their parents, who have completely won the real estate lottery and are sitting on millions in equity.
If you’re a first-time buyer worried about how these changes will impact your budget, let me know and we can work your borrowing ratios out to see if you should be accelerating your decision OR if waiting makes more sense.