New Mortgage Rules
February 7, 2018 | Posted by: Darren Brown
New Mortgage Rules- A Game Changer!
Yesterday (Oct 3, 2016), the Government of Canada announced sweeping mortgage rule changes that may impact your decision to buy a home or renew/refinance your mortgage. Here’s a breakdown of some of the new rules.
High Ratio Mortgages- (Buyers with less than 20% down payment)
- Beginning Oct 17th, all mortgages will now have to be qualified at a 4.64% interest rate. This is known at the “Benchmark Rate”.
- This is the government’s way of making sure that a homeowner could afford the mortgage payment in the event rates do rise that high in the future.
- EG: I have a client who I’ve pre-approved for $450,000 with a 5% down payment at a rate of 2.39%. With this new set of rules, the client will be able to keep his 2.39% interest rate, however because we now have to qualify him at a rate of 4.64% he will only qualify to borrow $355,000. Essentially he will qualify for 20%. With less than 2 weeks until these new rules are implemented the government is basically saying “you can afford this today, but not tomorrow”. That puts many clients & realtors in a tough spot.
- Clients with firm offers in place prior to Oct 17th will be exempt as long as the deal closes by March 1, 2017.
- Insurance premiums haven’t changed.
- Max 25 year amortization remains the same.
- What to do?
- If you’ve got an offer on a property, make sure you have an approval before Oct 17, 2016.
- If you’re home shopping, try to get your offer accepted before Oct 17 so that you will still qualify using the current guidelines. Remember it takes a lender a few days to get an approval, so the offer would need to be submitted around Oct 14.
- This won’t affect everyone. If your income is high enough you won’t have to worry about these new changes.
There will also be significant changes to the rules governing conventional mortgages (buyers with more than 20% to put down). There seems to be some confusion regarding how these rules will be implemented, so I will wait for some further clarification before commenting.
How Can I Help?
I’m always available to help you determine how these new rules will impact your individual situation. Please contact me at 780-616-2674 in Alberta or 306-241-8519 in Saskatchewan. You can also email email@example.com.