I’m not sure if it is crisp autumn air or all the pumpkin spice lattes they are drinking but October seems to be the month the Office of the Superintendent of Financial Institutions or as we like to call them, OSFI, enjoys announcing new mortgage rules.
At the same time last year, OSFI required all insured mortgages to qualify at the Bank of Canada rate (BOC). This meant, anyone with less than 20% down could no longer qualify at the 5 year fixed contract rate. This was another move that again made it harder to qualify to own a home.
(Side note: They already made this rule quite a few years ago to qualifying for variable rate & terms less then 5 years).
What was the effect of this? Purchasing power was already decreased by 20% if you had less then 20% down forcing people to either:
- Purchase a less expensive property
- Get more money for a down payment so they could qualify more easily
Now, OSFI decided to take it 1-step further, and as of Jan 1, 2018, all mortgages with MORE than 20% down, will have to qualify at the BOC rate or the Contract rate + 2%. This will decrease your purchasing power by 20%!
Based on a $100,000 combined family income you can qualify for:
Existing rules (5year contract rate): $650,000 mortgage amount
New rules (contract rate + 2%): $525,000 mortgage amount
This is another bad decision to change the rules by the government and it will affect everyone.
You may be asking yourself, “Is there a way around this” and the answer is NO…well…maybe…it all depends on your situation and what I can do to see what options there are for your individual situation.
There is a difference between OSFI regulated lenders and provincially regulated lenders. Provincially regulated lenders are forced to follow the insured rules BUT do not have to follow suit with the uninsured rules making them advantageous to the mortgage world. Depending on your situation, I can make this work in your favor!
If you currently own a home, have a mortgage, plan on selling, buying a property or up for mortgage renewal, YOU ARE AFFECTED by these changes.
How you ask?
You may NOT even qualify for the loan you currently have, and this could affect your ability to refinance, or sell and buy a new property!
If you think it will not be an issue for you, you may be very wrong.
10 plus years ago, they had 100% financing and all you had to do was have a pulse to qualify. Today, they require detailed financials with minimum exceptions allowed. In the future, they might require your first born child as collateral.
The long term ramifications of this new change means that more people will require mortgage planning with a mortgage professional; do NOT get left out in the cold and lose your home or chance to buy another home.
Do not let others who think they know give you advice. Speak to a Mortgage Broker who does this for a living, even if it is not me.
Call me today at 604-618-2017 to discuss how these changes may affect you and how to map out your future mortgage planning!