The countdown is on to January 1st, when the latest mortgage rules from OSFI will come into effect! A recent survey by Re/Max found that over 40% of Canadians don't even know about the upcoming changes, and another 40% don't think – or aren't sure – that the new rules will affect them. At the same time, nearly half of Canadians are considering purchasing a home in the next five years. A home is the largest purchase most of us will make, so do you really want to go into that decision without all the facts?
Who Do The Rules Impact?
These rules will affect you if you will be in an uninsured mortgage situation – that is, your mortgage will not be insured by CMHC, Genworth or Canada Guaranty. You need to know the rules if:
- You own a home with more than 20% equity and you want to refinance your mortgage.
- You are planning to buy a home (even if it's not your first home) with 20% or more down payment in the next few years.
- You are self-employed and considering purchasing or refinancing a home.
- You rely on rental income and want to refinance or purchase a property.
What Do I Need to Know?
The new rule that will have the most impact on people is the qualifying rate for your mortgage. You will need to qualify at either:
- Bank of Canada "benchmark" rate, 4.99% at the time of writing OR
- 2% higher than your contract rate.
The lender will need to use the higher value to calculate your debt service ratio.
Mortgage Professionals Canada has released a report estimating that 18% of mortgage borrowers who are stress tested would fail the test based on the market today. That translates into about 50,000 buyers who would have to consider a lower-priced property – if one is available – and another 50,000 people who wouldn't be able to make a purchase at all. Wouldn't that be a shock if you've been saving and thought you were well on track to buying a home?
Next Steps
Knowing the rules that will apply to your next home purchase or refinance will help you feel more comfortable and hopefully relieve some stress. The mortgage landscape is still complicated, and if you're trying to decide what will be right for your situation, talking to a mortgage broker is a great step to compare your options.
The Auxilium Team knows of at least two lenders who are pre-approving clients this month for a 120-day rate hold under the current regulations – even if you don't already have a property picked out. When you set up a complimentary consultation with us, we can run this scenario for you and let you know how it compares to waiting until the new year. However, we'd need to start looking at your file by December 15th in order to meet the deadline.
What are you waiting for? Contact us today to set up your appointment! Phone 250-590-6520 or 1-855-590-6520 toll-free, or visit our office at 307 Goldstream Avenue during regular business hours. We can also arrange an appointment evenings or weekends to work with you.
Auxilium Mortgage Corporation is based in Victoria, BC and works with clients locally and across Canada. The Auxilium team has over 100 years of combined financial experience and access to dozens of lenders to help you meet your goals.
