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)