The Federal government – not to miss its opportunity to “benefit” Canadians – has introduced a new stress test to help Canadians qualify more easily for mortgages (and of course I am being facetious!) The new stress test will require home buyers who were not going to require a CMAC-insured high-ratio mortgage to meet the requirements of passing the stress test. The stress testing rules, effective as of January 1, 2018, will require borrowers who are making a down payment of more than 20 per cent of the purchase price to prove they can still afford their mortgage payments if interest rates were significantly higher. The rule change will require borrowers to qualify for mortgages at the greater of the Bank of Canada’s five-year benchmark rate (currently 4.89 per cent) or an interest rate two percentage points higher than the rate negotiated.
Another Tax Hit
This spring gave us another gift from the Ontario Minister of Revenue, and our Premier Kathleen Wynne, in an attempt to slow down the torrid housing market, the Government introduced a Non-Resident Speculation Tax (NRST) which became effective April 21, 2017. This tax imposes a surcharge taxation rate or 15 per cent additional Land Transfer Tax. This tax applies to non-residents (individuals, corporations, and/or trustees) who purchase a residential property in the Greater Golden Horseshoe. The tax applies to land containing 1-6 single family residences. This includes freehold units and condominium units. It does not apply to rental buildings with more than six units nor to agricultural, commercial, and nonindustrial land. If the land in question contains both a residential and commercial unit, the NRST only applies to the value of the residential unit. It also applies to the purchase of a unit if any one of the Purchasers is a non-resident.
If a non-resident has a Canadian spouse, is a Canadian citizen, or permanent resident of Canada the foreign non-resident is exempt if they purchase the property with the Canadian spouse. For further information, contact the Ministry of Finance Land Tax Section, 33 King Street West, Oshawa, Ontario, L1H 8H9 1-866-668-8297.