(October 05, 2016
On Monday, our Government of Canada Finance Minister, Bill Morneau announced some changes that will hugely affect mortgage qualification rules.
Effective October 17th, they will require that any INSURED mortgage (in most cases less than 20% down payment) qualify using the Bank of Canada Benchmark Rate, which is currently at 4.64%.
What does this mean for you?
If you are buying a house and putting less than 20% down payment on a purchase after October 17th, 2016, you will have to qualify under new rules. Currently, if a purchaser is obtaining a fixed rate mortgage for a term of 5 years or longer, they would only have to qualify at the contracted rate – currently as low as 2.39%. Now they will have to qualify at the benchmark which will reduce how much they can qualify for by approximately 20%.
If you are putting less than a 20% down payment and need to qualify under the old rules, you should be submitting a purchase contract for approval prior to October 14th so that the lenders will have time to submit to the insurer prior to October 17th. And as always, the earlier the better!
Example of how the Purchasing Power Will Change:
If you are currently pre-approved at a purchase price of $359,000 PURCHASE PRICE, if you do not buy before October 17th, the maximum PURCHASE PRICE goes down to $282,000.