Variable Rate Update – Waiting for “The Fed”
September 7, 2016
Rate Update – New Mortgage Rules Change The Game
October 19, 2016
New Rules Designed to Make Housing Affordable?
There two dates you need to be aware if you are buying or a home or refinancing your mortgage:
- October 17, 2016
- November 30, 2016
As of October 17th anyone who has less than 20% down payment will now have to qualify for a mortgage at the Bank of Canada Posted 5 Year Rate. And as of November 30th any mortgage that is “back end” insured will also have to qualify at the Bank of Canada posted 5 year rate. This includes mortgage applications that have more than 20% down payment or if you are refinancing, 20% equity in your home.
What impact will this have?
For those with less than 20% down payment: if you were able to qualify for a $400,000 mortgage with a Five year fixed term, under the new rules that mortgage amount will be reduced to just over $315,000.
For those who’s mortgage is under $1,000,000 and have 20% down payment or more and the lender “back end” insurers, the result is even more dramatic. if you were able to qualify for a $400,000 mortgage with a Five year fixed term, under the new rules that mortgage amount will be reduced to just over $275,000.
Do you have an accepted offer or in the middle of negotiations?
For those with less than 20% down payment: providing your purchase funds prior to March 17th, 2017 you are fine. If you have an accepted offer but haven’t removed subjects, you have until October 17th to have your application approved and submitted to the mortgage insurer. You then have until March 17th for the mortgage to close.
For those with more than 20% down payment or refinancing: you have until November 30th for the mortgage to be back end insured by the lender. The details on how the lenders are going to handle this, and what deadlines they will impose is not clear yet. We will update you with new information.
What should you do?
If you are thinking about making an offer on a property and have less than 20% down payment you need make an offer as soon as possible.
For those with 20% down payment or wanting to refinance, the new rules will have a more significant impact. I would suggest that you narrow your focus and get an offer in, accepted and the financing wrapped up by November 15th to have access to the best interest rates.
These changes have caught the entire mortgage industry off guard, with no consultation or indication that they were coming. Sadly the end effect will once again put homeownership just out of reach for first time buyers.
