New Year, New Rules
As you may have heard, the newest residential mortgage guidelines issued by the Office of the Superintendent of Financial Institutions Canada (OSFI) are now in effect. If you have moving plans this year, you'll want to find out how this mortgage news might affect your affordability parameters.
Under previous bank rules, only insured mortgages (mortgage insurance is necessary when the down payment is less than 20 percent), variable rate and fixed mortgages for less than five years had to qualify at the Bank of Canada's posted rate, no matter what the actual rate the mortgage holder was actually paying.
Under the new rules, known as B-20 guidelines, borrowers with uninsured mortgages (where the borrower makes a down payment of 20 percent or more) are now also subject to this financial "stress-test." This means that the borrower has to prove an ability to cover mortgage payments based on a hypothetical scenario where their rate rises to the greater of the five-year benchmark rate published by the Bank of Canada, or 200 basis points higher than the contractual mortgage rate.
It's crucial to work with a real estate professional who understands your affordability guidelines, to find the right home for you — at the right price! There's no doubt that buying a home is expensive, but heading out with a set budget and a good understanding of your financial footing will go far in your successful home hunt.
Please call today for a no-obligation explanation of the new mortgage rules, and for the latest market update on condos in your area.
