Buy now to beat the new mortgage rules
Starting January 1, 2018, it’s going to get tougher to qualify for a mortgage. The Canadian banking regulator has a new rule: After January, all new mortgages will have to undergo a financial ‘stress test.’ Read on to find out what’s coming, and how if you buy now you can avoid the mortgage stress test.
Who do the new rules affect?
All homebuyers will be affected by the change.
Since 2016, only buyers with less than a 20 per cent down payment and an insured mortgage underwent a financial stress test. This means they had to qualify at a higher interest rate to see if they could make payments if interest rates were to rise. Starting January 1, 2018, even those with larger down payments must qualify at a higher-than- posted interest rate. The new rules mean everyone has to pass the stress test. This means:
- Buyers with uninsured mortgages
- Buyers with down payments of more than 20 per cent
“The Office of the Superintendent of Financial Institutions (OSFI)… wants to see stress tests for those borrowers similar to what is already happening in the insured market,” says Kelly Putter, writer for Yahoo Finance Canada.
When do the new rules take effect?
The new rules start January 1, 2018.
How will the new rules affect me?
When applying for a new mortgage at a federally regulated institution (i.e. a bank), there will be a new minimum qualifying rate equal to the Bank of Canada’s posted five-year benchmark rate, or a bank’s contract rate plus two per cent.
What steps should I take to avoid the stress test?
If you want to avoid the stress test, settle your mortgage now.
- Ask your Realtor for a move-in ready home you can own before January
- Do your homework and use a mortgage expert to get an idea of what you qualify for under the new rules
- Complete contracts and paperwork before January
What happens if I get a mortgage after January 1, 2018?
You’ll need to qualify at the Bank of Canada rate or the bank rate plus two per cent. Essentially, you have less borrowing power after January 1.
How a Mortgage Broker can help you
During this crazy time of mortgage rule changes a registered Mortgage Broker can help you. They negotiate with lenders on behalf of a borrower to obtain the best overall mortgage for the borrower’ circumstances. Mortgage Brokers are particularly useful in financing ‘non-standard’ situations which cannot be funded by a major national lender. This is possible because a Mortgage Broker has access to lenders who do not advertise nationally or operate retail locations. Our website is full of useful information, including our Jargon Busters page which helps clarify mortgage terms. Understanding this information is the first step to finding the right mortgage that works for you. Contact Client First Mortgage Solutions today!
Original Article – Edmonton Journal – November 24, 2017
