Are you ready for New Mortgage Rules?

On Tuesday, October 17, OSFI (Canada’s Office of the Superintendent of Financial Institutions) announced new mortgage qualifying rules which will come in effect from January 1, 2018.

According to the new rules everyone who are applying for mortgage without mortgage insurance, have to pass through the “stress test” on their qualifying income. Currently, this test is only for insured mortgage-applicants with less than 20% down payment. But as per January 1, 2018 it will be extended to every uninsured applicant, even they are paying more than 20% down payment.

Under the new mortgage rules, all the buyers who don’t wants to buy default insurance because they are putting 20% or more down payment will have to qualify for mortgage at the Bank of Canada’s 5-year benchmark rate (currently 4.89%) or contractual mortgage rate + 2%. Whichever is higher.

So, if you are applying uninsured mortgage by putting 20% or more down payment, you still have to prove that you have enough income and you will be able to repay mortgage through regular payments in future even if the mortgage rate goes higher than the five-year benchmark rate or in the situation of other financial difficulties.

 

How it will affect the Home Buyers?

Certainty, these tighter lending rules will lower the purchasing power of the home buyers.

According to the Economic analysis from the BCREA, “The impact of the new stress test requirement will be to lower the purchasing power of households by up to 20 per cent.”

So, due to new rules buyers will get smaller mortgage amount approvals, which may not be sufficient to purchase the property in the cities like Vancouver and Toronto even the other neighbouring cities in these regions.

If you are thinking to purchase a house for your family soon, give me call at 604-349-9149 to get more details about new mortgage qualifying rules.