New Year. New Rules.

A New Year Means New Mortgage Rules.As you know, the newest residential mortgage guidelines issued by the Office of the Superintendent of Financial Institutions Canada (OSFI) are now in effect. Actually, some lenders started implementing them in October 2017. If you plan to move this year, you'll need to research and know how the new mortgage rules will affect your affordability parameters.Why the change? The new measures are designed to help reduce Canadians' household debt, which has grown to be among the highest in the world.The high and increasing levels of debt amongst Canadians is due to high house prices.What’s Going To Happen?OSFI set a new minimum qualifying rate, or “stress test,” for uninsured mortgages (mortgage consumers with down payments 20% or greater than their home price).Under previous mortgage rules, only insured mortgages, variable rate and fixed mortgages for less than five years had to qualify at the Bank of Canada's posted rate, no matter what the actual rate the mortgage holder was actually paying. Under the new rules, known as B-20 guidelines, borrowers with uninsured mortgages are now also subject to this financial "stress-test." This means that the borrower has to prove they are able to cover mortgage payments based on a hypothetical scenario where their rate rises to the greater of the five-year benchmark rate published by the Bank of Canada, or 200 basis points higher than the contractual mortgage rate."Those who fail the test will need to look for something cheaper on the market. If you were to buy a home worth $700,000 last year, this year you might only be able to afford a home worth $560,000. That’s quite a big discrepancy,” Gale said, adding that it is probably more important than ever to speak to a mortgage broker to see what the options are." Matt RobinsonWorking with a real estate professional who understands your affordability guidelines, to find the right home for you — at the right price is critical at this point! There's no doubt that buying a home is expensive, but heading out with a set budget and a good understanding of your financial footing will go far in your successful home hunt.For more information click the links below:
Gregg Bamford and Ryan Bamford