Impact of the New Mortgage Rules

At the start of a New Year, many people strive to make New Year resolutions. Is becoming a homeowner on of them? Well, it may not be an exciting period for first-time homeowners as the new mortgage rules took effect, since the 1st of the year.

Previously, only applicants who had a down payment of less than 20%, had to pass a stress test. However, under the new rules, all home buyers will have to face the stress test. It is a way for the lender to determine whether the potential homeowner will be able to pay back the loan amount with interest, should the interest rates change.

Under these new guidelines by the OFSI (Office of the Superintendent of Financial Institutions), you will have to show that you can make mortgage payments at:
• The posted average 5-year rate by the Bank of Canada or
• A rate higher by 2% of the actual mortgage rate
These rules may affect those contemplating about refinancing or renewing their mortgage. Only those who will renew with their current lender, won’t.

Impact
First Time Home Buyers
Are you planning on going house hunting? Well, both uninsured and uninsured borrowers will have to face the stress test. In vetting your application for a mortgage, the lender will vet you using the five-year Bank of Canada, benchmark rate, or the at a 2% points higher than the contractual rate.
It implies that you may need to wait longer to get your dream house. That is by saving more for your down payment. Or you will have to settle for a cheaper home than the one you would have been able to buy, previously.

Mortgage Renewal & Refinancing
If you are renewing an existing contract that was in play before the implementation of the new regulations; this stress test won’t apply to you. However, for renewing borrowers who fail the stress test, you may have to stick with your existing lender. You won’t have the luxury of shopping around for better rates.
For those who may be considering mortgage refinancing as an option, with the new OFSI rules, you may have to settle for a much smaller loan. It is so, especially for those who are close to their borrowing limit.

Well, all your hopes of owning a home may not be lost. These rules only apply to financial institutions that are regulated federally. You can reach out to Expert Financial Corp, for insight on the mortgage products that may be suitable for you.