BREAKING MORTGAGE NEWS! Ottawa Announces Tighter Mortgage Rules

The Federal Government has announced yet another important mortgage rule change in efforts to cool the housing market by implementing what they call a “stress test.”

In other words, qualifying for a mortgage just got a whole lot more difficult.

Effective October 17th, all insured mortgages are required to QUALIFY for their mortgage using the current Bank Of Canada Benchmark rate of 4.64% compared to using the ACTUAL rate that currently ranges from 2.39% – 2.44%.

Any clients that are currently in the market to purchase or refinance but have not yet made an offer or committed to a live mortgage need to RE-QUALIFY immediately.

UNDERSTANDING THE NUMBERS

Let’s put this new rule into perspective…

A couple with a $100,000 income, no debts, and 5% down payment can currently qualify for a $484,000 home purchase using the current 5 year fixed rate of 2.44%.

That same couple having to qualify at the bench mark rate of 4.64% now qualifies for a $421,456 home.

That is $62,544 less buying power.

All in effect by Oct 17th.

Now more important than ever is the importance of working with a mortgage broker. Whether it a first-time home buyer or someone looking to sell their current home, you need to get pre-qualified before listing a house for sale and before making an offer on a new house. Talk to your mortgage broker today.

For more information on the changes, read these updates:

Department of Finance Canada: Backgrounder: Ensuring a Stable Housing Market for All Canadians

Department of Finance Canada: Minister Morneau Announces Preventative Measures for a Healthy, Competitive and Stable Housing Market

CBC News: Ottawa tightens mortgage requirements and targets foreign money

Title image credit to CBC News (Adrian Wyld/Canadian Press)