A house worth $317,451 today will be worth $295,000 after March 18 to most buyers. Why? Because new mortgage rules kick in on that date.
After March 18, buyers with less than 20% down payment can no longer get a CMHC-insured mortgage amortized over 35 years. That has been reduced to 30 years.
Based on the average resale home in Penticton, which sold for $317,451 in 2010, the monthly mortgage payment will increase$105 (based on a five-year mortgage at 4 per cent interest, and the minimum 5 per cent down payment of $15,873).
Looked at another way, the monthly payment on a 35-year mortgage will now only buy a home worth $295,000 – a difference of $22,451 – with a 30-year mortgage.
The most affected will be first-time buyers and they’re the ones who are fuelling our market right now. So, bottom line: home values could drop as the ability of these buyers drops.
That’s why March 18 is critical to sellers too.
To still get the 35 years, buyers have to have completed the purchase of a property by March 18. That means those buyers who thought they had forever to decide when to purchase will seriously be looking at everything available in their price range before the change.
The reality? If you’re planning to sell this year, selling before March 18 could be your best opportunity to get the highest price. If you’re a buyer and every penny counts, know that your ceiling of affordability is about to drop significantly if you’re not moving by March 18.
DECEMBER SALES: 4 sales in Okanagan Falls averaging $35,000; 1 sale in Kaleden, 1 in Twin Lakes.
