A Review of New Mortgage Rules

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Buying a house has become a little bit more complicated with the implementation of the new mortgage rules last month, as well as the refinance rules coming into play Nov 30th. With concerns that some of the real estate markets in Canada are inflated, these changes are supposed to remove some of the risks in the housing market. This can have a significant impact on the housing markets, especially first-time home buyers. We at Dave Sells, and our friend Evangeline with Evangeline Mortgages, have put together a short article to go over some of these changes, and clarify any questions you might have about the changes.

Mortgage Rates

  • New rules became effective Oct 17th, 2017
  • These rules apply to high ration purchases (less than 20% down) submitted after the effect date.
  • Mortgage applications with less than 20% down must pass a stress test.
  • A stress test qualifies the mortgage at benchmark rate – which is 4.64% – instead of the contract rate.
  • Clients will still receive the lower contract rate of their mortgage commitment – which today is between 2.35% to 2.69% – but they must qualify to carry the mortgage at 4.64%.
  • Fixed rate mortgage terms for 1-4 years and all variable rate mortgages had to qualify at benchmark rate prior to these changes; the new rules only affect the 5-year fixed term.

Refinance rates

  • New rules became effective Nov 30th, 2017
  • Some lenders will allow you to refinance and qualify at contract rate with a maximum term of 30 years amortization.
  • Most lenders must qualify to refinance at benchmark rate with a maximum term of 25 years amortization.

With these new changes, we have seen a 20-22% decrease in the purchasing power of clients after the stress test. Mortgage brokers are now crucial to providing opposition and competition to banks. This will prevent the banks from increasing rates and costs associated with mortgages, while decreasing options for obtaining a mortgage. Using a mortgage broker comes with great benefits, because they can still get you a mortgage with many of the big banks, while also accessing other exceptional lenders, all at no cost to you!

Let us and our friends help you find your forever home!

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