Pre-Sales- Safe of New Rules?
First Time Home Buyers
The best part about pre-sales, especially for First Time Home Buyers, is it allows you to reserve a unit for the cost of a deposit and have a significant amount of time to get everything in order. You can save money while renting or living at home, arrange a mortgage that best suits your needs, take advantage of higher income if your employer has scheduled raises, cash in on property appreciation without making a mortgage payment, a lot of good things.
The Stress Test
Back in the fall of 2016 we had our first stress test introduced which lead to only 20% down payment applicants being able to qualify at a 5-year fixed contract. With people qualifying at a 5-year fixed rate, they were able to potentially borrow more money, leading to a lot of people saving up or getting gifted down payments for their pre-sale condos.
Another Stress Test
Well, fast forward from Fall of 2016 to Winter of 2017, and yet another stress test was introduced, this time, removing the ability for anyone to qualify at their 5-year contract term-regardless of down payment size. For several months, it was not made clear by the government how pre-sale contracts were going to be treated when they were signed before January 1, 2018 with a closing date after January 1, 2018.
Qualifying at the Bank of Canada Benchmark Rate
This was important for those who just barely qualified for their mortgage on a pre-sale with 20% down and a qualifying rate equal to their contract rate. The reason why is because if someone was qualified at 3.20% and was just barely approved but now had to qualify at an interest rate of 5.14% (current Bank of Canada Benchmark), they would have to sell their contract to buy because they no longer could afford to close.
Pre-Sale Properties Grandfathered In
It is relief for anyone, that pre-sale properties are being grandfathered in for these new changes and will allow those who have paid their deposits to hold on to their contract of purchase. Pre-sales are a way of the future and it is important for the experience to be a pleasant one.
How Can Client First Mortgage Solutions Help You?
For information on mortgages for Pre-Sales and other mortgage inquires please contact us today. Watch our First Time Home Buyers video for more helpful hints and check out our FREE First Time Home Buyers Guide filled with information to guide you through the entire home buying process. Our knowledgeable Mortgage Brokers can save you time, money, and frustration by putting their years of experience to work for you. Contact us today!
Original Article – Dominion Lending Centres – February 16, 2018
