Tags: Real Estate, Mortgage
As soon as the calendar flips to 2018, the new mortgage rules announced earlier this year by the Office of Financial Institutions (OFSI) will come into effect across the country.
The “stress test”, as it is being referred to, will subject all new homebuyers to a minimum qualifying mortgage rate to ensure that they can withstand mortgage rates higher than the current rates in case the rates do rise throughout the term of their mortgage. Prior to Jan. 1, 2018 only buyers that put down less than 20% of the price of the home as a downpayment were subject to this type of test.
With the new rules, all borrowers will need to pass a stress test of either the five-year average posted rate or two percent higher than their actual mortgage rate – whichever one is higher. For example, if a homebuyer purchases a home, and secures a mortgage for 2.79%, they will be forced to qualify at 4.89% which is the five-year average rate as posted by the Bank of Canada. In the same scenario, if the buyer secures a rate of 3.15% they will need to qualify at 5.15% as that is the higher of the two options.
Not only will these rules apply to new mortgages but they will also apply to mortgage renewal applications if a borrower is switching lenders.
Overall these rules will essentially reduce the size of a mortgage that Canadian applicants will be able to take on across the board. A family with a combined income of $100,000 that could previously get approved for a $730,000 income with a 20-percent down payment may now only be eligible for a mortgage of $570,000.
For more information on the stress test or mortgages in general, contact one of our Cityscape Real Estate LTD, Brokerage Realtors today.
