With the new year just around the corner, so are Canadians' resolutions and new year plans, which often include aspirations to buy a home or renovate their existing home.
And while aspiring and current home owners that are looking to do renovations or just renew their existing mortgage may think they are armed with the knowledge they need, given that new stress test rules on mortgage lending were introduced by the Office of the Superintendent of Financial Institutions (OSFI) back in October, they could be sadly mistaken.
What many may fail to realize is the new stress test rules that will come into effect as of January 1st, 2018 will affect everyone looking to buy, renovate or renew, and not just those who have less than a 20 per cent down payment that are looking to buy. In other words, all mortgage borrowers looking to purchase, refinance their existing mortgage for needed funds, or looking to switch their existing mortgage at renewal to a different financial institution, will be subject to a new minimum qualifying rate, or "stress test".
To clarify, the new stress test requires anyone who falls under the category of "uninsured mortgage consumers", meaning they have equity in their home of more than 20%, to qualify using a new minimum qualifying rate. As of January 1, all consumers must qualify for a mortgage at (a) the five-year benchmark rate published by the Bank of Canada or (b) the lender contractual mortgage rate plus 2%; whichever is greater.
The only exception to being subjected to the new stress test is borrowers who have to renew their mortgages, but keep them with the same lender.
Among the other changes to come in effect for 2018 are new rules for lenders who will be required to more carefully scrutinize loan-to-value ratios when determining their mortgage loans. OSFI is said to be trying to ensure any agreed-to-mortgages going forward will not be larger than the value of the homes they are compared against.
Now more than ever, with buying power impacted, Canadians need to seek the advice of a mortgage professional. At One Link Mortgage, we are here to help you every step of the way. Contact one of our Winnipeg mortgage brokers today!
Source: VERICO Canada