New Rules In Effect Jan. 1st Will Affect Your Buying Power & Your Ability To Refinance Your Home!
I heard that the new stress test will devalue what someone can afford by 21%. So if one planned to buy a house at $400,000, they may be looking at just $320,000. Apparently it will impact 1 in 6 buyers, which is 17% of the total buying market.
There will be a negative effect on a segment of the market for sure. You need to understand that this is NOT just for mortgages that are CMHC insured, like the last stress test set up in October 2016. This is for basically ALL mortgages of buyers who have a 20% plus down payment.
It is supposed to come into effect January 1st, 2018 but from the articles I'm seeing, it could start asap as it will be at the banks discretion. Therefore, I'm simply writing to tell you the obvious ....if you are a buyer, have You been pre-approved for a mortgage as it is now more important than ever.
Watch the video below with Patrick Walchuk and Leo Maiorino from Mortgage Brokers Ottawa explaining the main aspects of these new mortgage rules and who they will impace the most!
The government (Office of the Superintendent of Financial Institutions) is implementing new mortgage rules that will reduce purchasing power on conventional purchases and refinancing of all homes.
The new qualifying rules will come into effect January 1, 2018 requiring all conventional mortgages to qualify at the greater of; a rate 2% higher than the contract rate, or the qualifying rate (currently 4.89%).
The new rules will impact your mortgage affordability by approximately 20%.
An average family income of $100,000 translates into approximately a $500,000.00 mortgage approval at current rates.
With the new rules, the average family's ability to qualify for a mortgage will be reduced to approximately $400,000.00.
For the purpose of this example, our mortgage calculations are based on a 30-year amortized mortgage and no other outstanding debts (OAC, rates subject to change).
What does that mean for you?
If you are purchasing with 20% down payment, start looking more seriously and purchase prior to January 1st 2018.
If you wait, your dream home may be substantially different than you expect.The Purchase agreement must be in place prior to January 1, 2018 to qualify under the existing rule.
Looking to consolidate SOME debt into your mortgage?
If you have credit card debt or any other unsecured debts you should strongly consider refinancing now prior to the qualifying rules changing on January 1st 2018. Typically people consider consolidating debt after their holiday bills come in the New Year, we recommend that you consider thinking about this process now, as it may not be an option later.
Other mortgage financing that will be impacted, refinancing for the purpose of:
- Home renovations
- Purchasing a recreational property
- Other major financial changes
You should discuss a plan now with your current or future lender or Mortgage broker. Even if your mortgage is not yet up for renewal, it is worth discussing what your options are before the changes come into effect in January.