Dear Clients, Friends and Family,
Over the next few weeks and months ahead, you will hear a lot of commentary on whether the new uninsured ‘stress test’ rules are good or bad for the consumer and necessary or unnecessary for the stability of the mortgage industry in Canada. Without question, you will hear that the sky is falling and that NO one will ever qualify for a mortgage again. My favorite is “the housing market in Canada is going to come crashing down”. With all the challenges, the Canadian mortgage industry has faced since 2007, including one of the worst economic crashes and some of the most significant rule changes to our industry, the housing market has continued to thrive. Although these new changes are significant and will have an impact to the consumer’s borrowing power, we believe the industry in time will adjust as it always does.
Saying all that, the one concern that I have after January 1st, 2018 is that it will become more difficult to qualify for a mortgage and to understand how all the industry changes over the past year affects you, NOW more than ever you need to be working with a mortgage professional. With my experience, knowledge and the variety of mortgage lenders and options I can provide, my services have never been more important. With access to most of the major banks, credit unions, mortgage companies and private lenders, I have the ability to shop the market place to provide you a tailored mortgage solution.
So, what was the biggest change announced? The biggest change to the new rules is surrounding the mortgage qualification and incorporating of a stress test to each mortgage application. Although a similar test was incorporated last year to high ratio mortgages (anyone with less than 20% equity), this new rule now applies to anyone with 20% or more equity in their home (conventional mortgage). Qualification for all conventional and unconventional mortgages will now be calculated at a minimum qualifying rate which is the GREATER of the five-year benchmark rate (currently 4.89%) published by the Bank of Canada or the contractual mortgage rate +2%. So, to put this in perspective, if the 5-year fixed rate is at 3.25%, the lenders are required to qualify your mortgage using payments based on the rate of 5.25% (3.25% + 2.00% = 5.25%). You don’t need to be a mathematician to understand that these changes will drastically effect how much you will qualify for your next mortgage.
If you are concerned about how these changes could affect you now or in the near future or if you are thinking of renovating, consolidating or purchasing an investment property, now is definitely a good time for us to go over your options and review the your current mortgage and future goals.
Please do not hesitate to call me at 604-839-1803 or email me at firstname.lastname@example.org so that we can arrange a time to go over your options.
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