Thinking of buying a new home? You will want to talk to your mortgage agent and confirm your pre-approval amount before you look any further. Depending on your downpayment, you might not qualify for the amount you thought you did.
Finance Minister Bill Morneau announced Monday that as of October 17th 2016, all insured mortgages must undergo a “stress test” that ensures a borrower’s ability to make their mortgage payments at a higher interest rate. Effectively, that means borrowers will be tested against their ability to pay their mortgage if actual rates were as high as the big bank’s five-year posted mortgage rates, which the Bank of Canada says currently average 4.64 per cent.
What does this mean in plain terms? Lenders were pre-approving and approving mortgages at the discounted lending rate of approx 2.4% to 2.6%. Now, they must qualify you for the mortgage at the Bank of Canada posted rate of 4.64%. This new rule will LOWER your qualifying lending amount anywhere from 20-25% from what it was before October. *
If you have any questions, please feel free to contact me at (519)791-9545. I can put you in touch with a trusted mortgage professional that will get you on the right track and into that new home.
UPDATE: Oct 14th 2016: Dominion Lending Centres has released an info package outlining the changes:
(* Figures are approx, please consult with a qualified mortgage professional for actual calculations)