October 17, 2016 is a critical date - changes to mortgage insurance rules were announced by the federal government and will take effect that day.
Mortgage insurance rules will change to require all insured mortgages (anything less than a 20% down payment) to undergo a ‘stress test’ from the lender. That test will require the buyer to qualify for a mortgage at the Bank of Canada posted rate, currently 4.64%, even though they would still receive the contract rate.
The buying power of the client will be lowered by the need to qualify at the higher rate.
Example (as provided by a mortgage professional)
Family A is qualifying for a mortgage using the following information:
|Current Annual Family Income||$87,000|
|Household Debt Payments||$700 per month|
|Property Tax Payments||$3,000 per month|
- Qualifying for a mortgage today, Family A qualifies for a purchase price of $450,000.
- Qualifying for a mortgage after October 17, 2016, given the need to qualify at the Bank of Canada rate of 4.64%, Family A qualifies for a purchase price of $360,000.
If you are looking to purchase soon, I highly recommend speaking with a mortgage professional about your circumstances. In many cases, the changes will affect your buying power and adjustments may need to be made to your search criteria.
Accepted Offers to Purchase signed before October 17, 2016 will qualify under the current rules provided that the mortgage is funded by March 1, 2017.
As always, if you have any questions you would like answered or are looking for a recommendation on a mortgage broker, feel free to give me a call at 403.703.1052.