With housing prices trending higher it is becoming increasingly difficult for first-timers to come up with enough funds for a down payment and
that is why more and more first-timers are turning to relatives for help.
According to a recent study on www.ratehub.ca, the percentage of Canadians who received financial help from relatives to get into the housing market in 2016 was 45 per cent in Québec, 42 per cent in British Columbia, 38 per cent in Alberta, 35 per cent in Ontario, 33 per cent in Manitoba and Saskatchewan and 18 per cent in the Atlantic provinces. That’s a lot of support, much of it coming from Boomer parents making it financially possible for their adult kids to buy their first home. Add to this, the new mortgage measures introduced by the Department of Finance last fall and the numbers may just increase.
Under the new rules, all homebuyers seeking an insured mortgage will be subject to a mortgage rate stress test. Previous to this, only borrowers who opted for a variable rate mortgages or fixed rate mortgages with terms of less than five years were required to pass a stress test. The test measures whether the buyer could afford to make mortgage payments in the event interest rates rise.
The stress test also requires a ceiling of no more than 39 per cent of household income being required to cover home-carrying costs such as mortgage payments, heat and taxes.
Some experts are predicting that the new rules will limit the options available to potential homebuyers – especially those trying to break into the market for the first time.
Buyers who might not be able to qualify under the new rules may need to scale back their dream home because the down payment they can afford is not enough to qualify for the mortgage amount they need or, look to other options: find more money for the down payment or add another person to the mortgage. In both cases that answer could be the assistance of a Boomer parent.
If you’re planning to buy for the first time, sooner may be better than later to avoid even higher housing prices and/or mortgage rates. If you’re a Boomer parent or grandparent wanting to help your adult kids afford their first home, first find out how best to do that without undermining your own finances. A good place to start – having a conversation with your professional adviser.
This column, written and published by Investors Group Financial Services Inc. and Investors Group Securities Inc. presents general information only and is not a solicitation to buy or sell any investments. Contact your own adviser for specific advice about your circumstances.
