The Bank of Canada’s latest changes to the B20 mortgage guidelines, due to come into effect on Jan. 1 2018, are going to have a significant impact on a large portion of Canada’s population. Whereas previous guidelines have mostly affected regular home buyers, the latest changes will also impact real estate investors who rely on leveraging to build their portfolios and grow their real estate investment businesses.
Under the guidelines, OSFI is setting a new minimum mortgage qualifying rate (stress test) for borrowers, even ones making a down payment of 20% or more. The new qualifying rules will make it much harder for first-time homebuyers to secure financing and get a foot on the property ladder. These new rules also affect real estate investors seeking to help clients who are turned away from banks but are looking for an alternative solution, such as rent-to-own.
“Investors can also expect a reduction in their purchasing power for properties as most investors leverage the investment opportunity to increase their ROI,” says Jeff Belanger, VP – Investor and Client Relations at HOS Financial
. “However, the inability of the consumer to secure financing will increase the need for suitable alternative lending solutions like rent-to-own programs, which creates great investment opportunities for the ambitious investor.”
The new rules are going to force investors to look for more creative ways to capitalize on the real estate additions to their portfolios. In the new environment, more investors will be looking for alternative investment strategies rather than just buy-rent and hold.
, who have been leading the rent-to-own industry with its Home Owner Soon rent-to-own program, has seen a significant increase in the number of investors inquiring about the 3 platforms it offers for investors. Namely, individual rent-to-own programs, joint venture platforms, and Real Estate Limited Partnerships (RELP).
“Working with a firm that offers these investment channels is a significant advantage for real estate investors in Canada,” says Belanger. “Although investors are going to find it more difficult to get the mortgage financing needed to invest in as many investment programs like rent-to-own, at least they will be able to take advantage of the high quality borrowers who are forced to consider rent-to-own for their new home purchase. With the multiple platforms available at HOS Financial
, investors now have a choice of platforms available.”