Mortgage Blog
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New Mortgage Stress Test-Mortgage and Home Financial
October 23, 2017 | Posted by: Paul McCormick
New Mortgage Rules took place on January 1 2018 and it has changed the approval process if you are purchasing a home or refinancing your mortgage.
If you are looking to buy and will have 20 percent or more to put down, or if you are considering refinancing your existing mortgage, you will be subject to the new 'stress test' imposed by the Office of the Superintendent of Financial Institutions(OSFI) released on October 17/17.
This new so called 'stress test' is designed to protect homeowners should interest rates rise. Lenders will now be obligated to qualify all new conventional mortgages at the greater of the Bank of Canada's 5 year fixed benchmark rate(currently 5.14 % or the contracted mortgage rate you negotiated at your lender plus 2%. So if you have a 5 year mortgage rate of 3.49% then you have to qualify as if your rate was 5.49%.
What does it all mean?
It means that it will be difficult for many potential new home buyers or homeowners wishing to do a refinance to get a mortgage.
For example: If you are buying a new home or are planning to refinance next year, your payments will always be based on your 'contract rate'. Your contract rate is the rate you negotiated with your lender. Lets say you got a 5 year mortgage at 3.49%. Your payment will be based on this rate, however with the new rule it might change how much mortgage you will qualify for because the lender has to qualify you on the new stress test rate. In this example that rate will be 3.49% plus 2% or 5.49%.
So how much can you afford under the new rules?
Call or email me and I will work with you to see what you qualify for. If you are in the market now to purchase or refinance your home, now may make sense to do so.
Paul McCormick
905 409 7999