The Office of the Superintendent of Financial Institutions (OSFI) is currently studying the possibility of applying another major change that will affect anyone looking to purchase or refinance a property (1 to 4 units) and having at least 20% in down payment and/or equity for mortgage refinancing:
- Primary residence
- Secondary residence
- Income property (1 to 4 units)
* These changes are expected to come in effect by the end of 2017 (date to be confirmed).
Here is an excerpt of the OSFI's expectations:
Requiring a qualifying stress test for all uninsured mortgages (at least 20% in down payment and/or equity for mortgage refinancing);
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The key element that will most likely have an impact on you this fall is already in effect in some financial institutions:
The qualification rate of all uninsured mortgages must at least equal the amount of the mortgage's contractual interest rate, plus 2%.
Here is an example of what a 2% increase could represent on your future purchase's mortgage qualification:
Price of new house = $300,000
20% down payment = $60,000
Funding amount = $240,000
Qualification with the negotiated rate: 2.94% on a 5-year term = $1,128.41
Qualification with the negotiated rate +2% = 4.94% = $1,387.67, a difference of $259.26 / month.
In the above example, if you are pre-approved for a maximum of $1,128.41 / month (principal and interest), you will unfortunately need to scale down the purchase price of your new home to $243,000 instead of $300,000 (- $57,000) to respect the maximum payment under these new qualification standards.
*** NOTE: The date of entry into force of these new rules has not been announced yet. However, the OSFI only gave a few days notice before applying their new conditions last fall.
What to do?
As you know, the first step before buying a house, a condo, a cottage, an income property, etc., is relatively simple: you must first obtain a mortgage pre-approval.
As an OACIQ-certified mortgage broker, I am your partner of choice to guide you through this important purchase. I will advise you on the following points:
- Determine the maximum price according to your payment capacity;
- Determine the down payment required depending on the type of property;
- Establish a project budget and analyze your credit report;
- Inform you of available programs (Home Buyers' Plan, Purchase plus improvement Plan, etc.);
- Provide you with the best tax advice and strategies;
- Explain all costs to be expected at the time of purchase, e.g., property inspection, notary costs, property transfer tax, insurance, etc.;
- Offer you the best financing solutions at the best rates and most importantly, listen to your short, medium and long term needs;
- As a mortgage broker, I can even guarantee a rate for your future loan mortgage with a pre-approval certificate for the banking institution of your choice, free of charge!
If you wish to purchase a property, please don't hesitate to contact me; by doing so, you'll be better prepared for your project!
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