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Will the New Mortgage Changes Affect Me?

New Mortgage Rule Changes

Will the New Mortgage Changes Affect Me?
No doubt you’ve heard endless buzz over the last several weeks concerning the latest mortgage rule changes that are set to come into effect January 1st, 2018.
The mainstream media has a way of making everyone feel like the sky is falling every time new rules are announced – or any news is released regarding market conditions or real estate sales data, for that matter. 
That’s why it has never been more important to talk to your local Red Deer mortgage broker and find out how these rules may personally impact you. And if they do apply to you, how can we best manage your needs moving forward? 
Since the rules will not be applicable until the New Year, we have time to examine your current mortgage needs and decide if refinancing makes sense for you if you’d like to free up money for the upcoming holiday season, to use towards travel plans, or however you wish.
Main focus on uninsured mortgages
In total, the Office of the Superintendent of Financial Institutions (OSFI) announced three new changes to the mortgage rules that govern all federally regulated lenders, including:
  1. Minimum qualifying rate for uninsured mortgages
  2. Expectations around loan to value (LTV) frameworks and limits
  3. Restrictions on transactions designed to work around these LTV limits
The change with the greatest impact will be in the uninsured mortgage realm. This affects homebuyers who’ve saved more than a 20% down payment – or are looking to refinance their current mortgage.
In January, mortgage applications for uninsured mortgages will be subject to a new ‘stress test’ using the higher qualifying rate between the Bank of Canada’s five-year benchmark rate (currently 4.99%) or the contractual mortgage rate +2% (5-year fixed rate at 3.19% +2% = 5.19%).
In other words, if you fall into the uninsured mortgage category, you’ll qualify for less money to put towards your home purchase in the New Year.
Previously, only borrowers who had less than a 20% down payment (high-ratio mortgage borrowers) were subject to a stress test.
Will the loophole help?
Shortly after OSFI released details about the new rules, mortgage brokers pointed out that there was a loophole lenders could take advantage of to qualify more mortgages once the new rules come into effect.
OSFI failed to regulate the length of the amortization used in the new qualifying calculation. While insured mortgages must be qualified at a maximum of 25 years, lenders could extend amortizations from 25 up to 35 years for uninsured mortgages, potentially creating a smaller monthly payment that would qualify more borrowers.
Only time will tell if the loophole will still be open when the new rules come into play.
Regardless, it’s important to think about your options before the New Year if you’re going to have an uninsured mortgage or if you plan on refinancing anytime soon.
Let’s discuss your options. Call or email me today!


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