2018 Mortgage Rule Changes – Learn how it will affect you

mortgage rate

2018 Mortgage Rule Changes – Learn how it will affect you

In October 2016 it was announced that home buyers with less than a 20% down payment would be required to qualify for a mortgage based on the current Bank of Canada benchmark rate rather than the current mortgage rates. The purpose of the legislation change was to provide a “stress test” for home buyers to protect them against potential changes in interest rates.

Fast forward to October 2017 and the announcement of a new “stress test” beginning January 2018 which will require ALL home buyers (regardless of how much they are putting down) to qualify based on the current Bank of Canada benchmark rate OR their actual current mortgage rate plus 2.00%, whichever is higher. This will also include current home owners who plan to refinance or make changes to their current mortgage.

What does this mean for you? Let’s put it into perspective.

The median household income in Kingston is $75,911*. Based on the current mortgage rules, with a current mortgage rate of 3.09%, a family with this income (and minimal other debts) could afford a home worth $475,000 with a 20% down payment.

Using the new mortgage rules, this same family with the same down payment would only qualify for a home worth $405,000.

That’s a difference of $70,000! Whether you’re familiar with the housing market or not, it’s pretty clear that $70,000 can make a huge difference when it comes to purchasing a home.

Luckily, there are mortgage brokers out there who can provide strategies to mitigate the effects of these new rules and provide access to other lenders who are not under OSFI Regulation and are not required to following these new guidelines. Contact a RealtySource Representative for further assistance anytime to discuss further. We can arrange a one on one consult with a mortgage professional that can assist you.

 

*Based off Kingston Economic Development Corporation report, June 2017

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