Buy now to beat the new mortgage rules
Starting Jan. 1, 2018, it’s going to get tougher to qualify for a mortgage.
The Canadian banking regulator has a new rule: After January, all new mortgages will have to undergo a financial ‘stress test.’ Read on to find out what’s coming, and how if you buy now, you can avoid the mortgage stress test.
Q: Who do the new rules affect? A: All homebuyers will be affected by the change.
Since 2016, only buyers with less than a 20 per cent down payment and an insured mortgage underwent a financial stress test. This means they had to qualify at a higher interest rate to see if they could make payments if interest rates were to rise. Starting Jan. 1, 2018, even those with larger down payments must qualify at a higher-than-posted interest rate. The new rules mean everyone has to pass the stress test. This means:
buyers with uninsured
■ mortgages
buyers with down payments ■ of more than 20 per cent
“The Office of the Superintendent of Financial Institutions (OSFI)…wants to see stress tests for those borrowers similar to what is already happening in the insured market.” - Kelly Putter, Yahoo Finance Canada. Q: When do the new rules take effect? A: The new rules start on Jan. 1, 2018
Q: How will the new rules affect me?
A: When applying for a new mortgage at a federally regulated institution (i.e. a bank), there will be a new minimum qualifying rate equal to the Bank of Canada’s posted five-year benchmark rate, or a bank’s contract rate plus two per cent.
To view current Bank of Canada conventional five-year mortgage rates, visit www. bankofcanada.ca/rates/dailydigest.
Q: What steps should I take to avoid the stress test?
A: If you want to avoid the stress test, settle your mortgage now. Buy a movein ready home in Graydon Hill, and talk with your builder about ensuring your contract and mortgage are finalized before Jan. 1, 2018.
Visit showhomes in Graydon ■ Hill
Fall in love with Graydon ■ Hill
Choose your favourite ■ builder
Ask for a move-in ready ■ home you can own before January
Do your homework and ■ use this mortgage calculator to get an idea of what you qualify for under the new rules: https://globalnews.ca/ news /3581766/ mortgage calculator-canada- interest rate-hike
Head to a bank or broker ■ Complete contracts and ■ paperwork before January
Q: What happens if I get a mortgage after Jan. 1, 2018? A: You’ll need to qualify at the Bank of Canada rate or
the bank rate plus two per cent. Essentially, you have less borrowing power after Jan. 1.
Extra homework
Global News https://globalnews.ca/news/3807946/ ■ mortgage-rules-stress-test
Financial Post http:// ■ business.financialpost.com/ real-estate/mortgages/ canadas-banking-watchdogsets-new-rules-for-mortgage-lending
Canadian Mortgage ■ Trends www.canadianmortgagetrends.com/2017/10/ osfi-unveils-new-stress-testrules