With the new mortgage rules taking effect on January 1st, 2018. Here are some insights on what to expect:
Home buyers with a down payment of 20% or more will be tested to ensure that they can afford their mortgage payments if interest rates increase. The stress test will be using either the Bank of Canada's 5-year benchmark rate or the customers mortgage interest rate plus 2%- Whichever is HIGHER.
Here's a basic overview of the process:
DO YOU HAVE A DOWN PAYMENT OF 20% OR MORE?
If NO, Buyers with down payments of less than 20% are subject to the current rules, meaning their finanacial institution will assess their ability to pay back their mortgage at the Bank of Canada's five year fixed rate.
ARE YOU PRE-APPROVED FOR YOUR MORTGAGE?
IF NO--> As of January 1, 2018, anyone who gets their mortgage from a federally regulated lender will be subject to the new rules.
IF YES--> Regardless of when your home closes, if you receive your mortgage pre-approval before January 1, 2018 and you purchase your home before your pre-approval expires, you are not affected by the new rules!
ARE YOU RENEWING YOUR MORTGAGE?
IF NO, get advice from your mortgage specialist about information and the new rules that are being applied. It's good to be constantly informed even if you are not planning on securing or renewing a mortgage at this point of time
ARE YOU STAYING WITH YOUR CURRENT LENDER?
IF NO--> If you're renewing your mortgage and decide on to move to a new lender, you'll be treated as a new borrower and will have to qualify at the higher stress test rate.
IF YES--> If you're renewing your mortgage and decide to stay with your current lender, you will not be subject to the new stress test.
Now, whether you are buying a new home or renewing your mortgage, be sure to speak with a mortgage advisor who can help you with your questions and decision choices!
Have Questions regarding Real Estate? The Iris and Evelyn team are here to help! With their countless years of buying and selling Real Estate Properties, their experience and knowledge can help you make the right choice!
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