Mortgage Rules Are Changing January 1, 2018!
Recently the Office of the Superintendent of Financial Institutions (OSFI) voted to implement new lending rules for home-buyers which will impact the size of home one can afford. Various scenarios point towards affordability of 20% less home than under the current rules. This will have a huge impact on being able to acquire your "dream home" and especially for First Time Home Buyers subject to the new "stress test" regardless of how much they put forth for a down payment.
The new minimum pre-qualifying rate is against the higher Bank of Canada 5 year benchmark rate (4.89%) or 200 base points above your current lower contractual fixed 5 year mortgage lending rates.
There is an exception to this rule if you choose to remain with your current lender at renewal time when re-financing, the stress test will not apply. But will come into play if you choose to switch lenders at renewal.
For First Time Home Buyers, they have 3 options:
1. Rent a bit longer to pay down debt and have more income, to pass the stress test. Or "buy down", for instance a condo versus detached home.
2. Provide a bigger down payment to pass the stress test
3. Ask a co-signer to come on board to help pass the hurdles of the new rules.
In either case, to avoid any nasty surprises and let downs.... please, please, please do some research, understand the new lending rules and go out and get pre-approved for financing before you start house shopping so you know what you can afford!
As always myself and the team are here to assist, so let us help and show you "Real Estate in Motion" by guiding you through these changing times, to your Dream Home! Don't delay, the time is now!