We thought we had heard the last of the problems caused by the mortgage rules that were instated last year. But for some condo buyers, the problems are just starting. Those problems come in the form of pre-approvals, some of which were obtained as long ago as 2009, and how borrowers can no longer afford them due to the fact that they’re dealing with new restrictions now that they didn’t have back when they first applied for their mortgage. Or their pre-approval anyway.
“In the past four years, the amortization period has gone down from 40 to 25 years,” says Jake Abramowicz when speaking with CBC News in a recent interview. “As a result, suddenly that pre-approval buyers had in 2009 is no longer valid. They will either need to have more income or more down payment.”
And if they can’t do either of those, they may have to give up the unit and forfeit their deposit. Worse, they could end up being sued by the developers from which they bought the condo unit in the first place.
That’s the biggest problem Oksana Miroutenko, a real estate lawyer in Toronto, says she’s seeing. She says that about 10 per cent of her clients have been asking family members for help, selling off other assets, or refinancing existing properties in order to come up with the money they need. Or else they face being sued.
“If the market conditions are not the best and the builder has to put the property on sale again and if the purchase price is lower than the price that you purchased, then the builder has the right to sue for the difference,” she says.
Other industry insiders say that while this problem has been getting a lot of media attention due to the interview on CBC, it’s not a widespread problem that will affect too many borrowers. But what about those borrowers that it does affect? It’s become a question of who’s to blame.
Some blame the government, for instating rules that would affect borrowers so negatively; while others turn to borrowers who took on too much in the first place, saying that their inability to look further down the road – and take a good long look at their budget – is the reason for the problem in the first place.