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New Mortgage Rules Comin...

The Cliff Notes Version

Hey everyone. So as of January 1st, 2018, when I'm sure you'll all be feeling not hung over at all, you'll also have to deal with some extremely significant mortgage changes taking effect. Instead of me attempting to explain them, I will take the words from our trusted mortgage specialist Geoff Rathgaber to clarify what's going on:

  • When qualifying clients, federally-regulated financial institutions (FRFIs) will be required to approve conventional or uninsured residential mortgages at the greater of the contract rate plus 2% or the 5-year benchmark rate published by the Bank of Canada. This change applies to conventional / uninsured mortgages only.

The government’s objective is to slow the housing market and ensure long term stability. As a result, all potential home buyers will need to prove they could still afford their mortgage payments if interest rates were 2% higher than the rate they negotiate.

So what does this mean? Well, let's put it in terms of actual dollars and cents, again provided in crystal clear terms from Geoff and his team.

For example, let's say you're buying a home for $500,000.

The current state of qualifying for a purchase of $500,000 with 20% down payment now and going forward January 1st can be understood as follows: based on the payment amounts at this level of mortgage the family income required to service this mortgage would change from $7499/month -$89,988/yr (as it stands from now to Dec 31st/2017) to $9185/month-110,220/yr (January 1st/2018 and beyond).

That reflects a 22% increase in family income to qualify for the same home.

Yikes. That's a massive swing in a difficult direction for a lot of buyers. There isn't a lot to overthink here really...if you want to buy, do it before that new years day hangover. Make sure to call us, or Geoff if you have any questions.

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