Are you in the market for a new home? Well as your Oakville mortgage broker, it is our duty to inform you on the new Canadian Mortgage Rules before you start the home loan process.
As of January 2018, new rules were enacted across all of Canada in regard to getting a loan. The biggest change is the Stress Test.
What is the Stress Test?
The new stress test is done to see what borrowers qualifying rates would be. This new rate is either the 5-year benchmark rate by the Bank of Canada, which is currently 4.89%, or your current contract mortgage rate plus an additional 2%. Whichever is higher of the two rates, is what lenders base your qualifying rate off of.
This is affecting Canadians affordability, even if you have a down payment of 20% or more. It is important to go through your finances with the new mortgage rates in mind because you might have a different price range to shop around in.
Why the Change?
The purpose of the new mortgage rules is to help mortgage consumers not borrow more money than they can afford. Recent trends suggest that a lot of people would borrow the most amount of money they can afford, which is creating more financial debt. The new rules reduce that limit by increasing interest rates and forcing homeowners to buy cheaper. The new rules are also a way to cool down the market.
Toronto and Vancouver have a particular high housing market, and the rates keep increasing. The government is hoping to cool down the market so the prises stop rising exponentially.
Can you Refinance?
Even if you already have a set mortgage and are wanting to refinance, these new rules still apply. You are allowed to refinance up to 80% of the home’s value and pass the same stress test rules as listed above.
As a mortgage broker in Oakville, Ontario, James has been involved in the local industry for years. He and his team are confident that they can be the perfect mortgage broker for you.
If you’re looking for a mortgage professional to help guide you through the journey, we encourage you to contact our team today and let us show you how we can help!