[Source: Synergy Mortgage, October 18, 2017]

Stringent NEW Canadian Mortgage Rules take affect January 1st, 2018.

Office Of The Superintendent Of Financial Institutions (OFSI) has finalized NEW mortgage rules applicable on all federally regulated banks.  The new rules officially start January 1, 2018.  This will dramatically change the lending landscape.

The new rules apply to all bank mortgages and will make borrowing more difficult even for clients who have substantial down payments, strong income and excellent credit.  Alternative lenders with relaxed qualification will be only option for many clients next year.

People who are considering buying or refinancing in the near future, may want to get approved NOW or very soon.  Until the end of this year, borrowers may take advantage of today’s qualification rules at lower rates.  Come January 1, 2018 most bank clients will lose a significant amount of buying and refinancing power.

The biggest change will be for people with more than 20% downpayment or equity in their homes.  They now have to undergo a financial stress test to prove they can continue to make mortgage payments if bank interest rates rise.

This will effect peopke who are planning to purchase, or refinance their homes, regardless of the mortgage term or product they choose.

The stress test requires all borrowers to qualify at the greater of the Bank of Canada benchmark rate, or 2% higher than the actual interest rate.

The Bank of Canada Benchmark rate today is 4.89%.

Given that the 5 year fixed interest rate currently is approx. 3.40%…this means borrowers will have to qualify at 5.40% as it is higher than 4.89%.

For most borrowers, this is a 22% reduction in the size of mortgage they qualify for.

In the event a borrower has purchased a pre-sale that is under construction, it is very important that they contact us as this will affect you at completion.

Adding a secured line of credit on to a home now while the current rules are still in efffect, allows home owners to have access to their equity for the future use.  Lines of credit do not require any payments until such time that the money is used.  It is fully open and readvancable so you may use the money and then pay it off at anytime.  There is a legal fee to set it up.

This may be the last change to take equity out of your home and qualify at 3.44%.

Please contact our office if you would like to discuss your Mortgage plans or have any questions about how this will effect you.  Our office tel: 604.269.9419 or email: Team@SynergyMortgage.ca