As we head into the fall market and after 1 year since the last mortgage rule changes, OFSI (the governing body in Canada for financial services) are proposing yet another mortgage rule change that may impact your home buying/purchasing limits. OFSI has proposed changes to the Guideline B-20 Residential Mortgage Underwriting Practices and Procedures (referred to as B-20 – http://www.osfi-bsif.gc.ca/Eng/fi-if/in-ai/Pages/rfmrm.aspx). The most concerning change would be imposing a 200 basis point qualifying stress test for all uninsured mortgages.
What does this mean for the buyer? Even a 50% downpayment, would be required to qualify for the mortgage based on a rate 2% higher than the actual mortgage rate you would be obtaining. So, if the actual rate you were obtaining today were let’s say 2.99%, you would have to qualify for the mortgage based on a rate of 4.99%( 2.99% + 2% for qualifying rule = 4.99%)
This higher qualifying rate would essentially reduce the amount of mortgage that could be obtained hence reduce the eligible purchase price for a new home. On average, this would reduce buying power by approximately 14%.
Here is an example of the reduction in buying power:
-Clients are selling home and buying a new one -Household Income: $120,000 per year -Down payment: Up to $180,000 (they want to put at least 20% down) $120K Annual Income/20% down
Today: 2.99%, 30 year amortization. Max Purchase Price $900K Down payment $180K Max mortgage $720K
Proposed: 4.99%, 30 year amortization Max Purchase Price $800k Down Payment $180K Max Mortgage $620K
While this is still in the proposal stage, we anticipate this coming into effect mid to end of October 2017. The good news is, buyers can prepare for these changes ahead of time. The most effective way is by obtaining a pre-approval now that secures the rate for up to 120 days. Although It is not certain that lenders would be able to honor the approval based on how OSFI rolls out the proposed changes, it is still one of the best ways to be proactive. Let us review your options now and create an optimum mortgage plan. Contact us today for your free home financing advice.
By Referral Mortgage Consultants*
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Dave 604 897 2741 Jordi 604 615 1312
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*By Referral Mortgage Consultants – doing business as BRMC is: Verico Preferred Financing Inc / Verico Canadian 1st Mortgage Corp which have a co-brokering agreement and there is a common Mortgage relationship and are licensed with the Verico Dreyer Group. Mortgage ownership, that employees of both Mortgage companies may review, advise and help process the Mortgage files. That Verico Preferred Financing Inc & Verico Canadian 1st Mortgage Corp share the some expense and income from mortgages. Kim Langille Featured on thess site is an unlicensed mortgage assistant only, not a Mortgage Consultant. Jordi Browne featured on this site is the Mortgage Broker of record. “The Broker” is Jordi Browne. Jordi Browne also holds a Life Insurance License and represents Verico Canadian 1st Mortgage Corp. Dave Browne featured on this site has a Life Insurance License too but is an independent agent– Jordi and Dave Browne co-broker life insurance files and share expenses, all income retained by Verico Canadian 1st Mortgage Corp.