As you've probably heard through the media, the Office of the Superintendent of Financial Institutions has announced yet another mortgage rule. This will impact home buyers and those looking to refinance. We recently met with Zach Silverman of the Silverman Mortgage Group to discuss the changes and what these changes mean to our clients...
New Mortgage Rules Explained
✍️ New Mortgage Rules Explained ⬇️⬇️⬇️ Here’s what you need to know‼️Posted by MOE Real Estate Team on Wednesday, November 8, 2017
Click here to view the full Facebook post ➡️ https://www.facebook.com/ScottMoeRealEstate/videos/1515196595193338/
URGENT THINGS YOU NEED TO KNOW IF YOU PLAN ON BUYING A HOME
You should consider purchasing sooner rather than later. As of January 1, 2018 your buying power could be reduced up to 20% with the implementation of the latest mortgage rules. ***IMPORTANT - If you act quickly and obtain a signed purchase agreement before January 1, 2018 and a mortgage approval from a lender, you will be exempt from the new mortgage guidelines.***
THINGS TO KNOW IF YOU PLAN ON REFINANCING
If you plan on refinancing either for personal use or if you are a small business or professional that may want to access funds in the future, you absolutely should consider doing this now.
ABOUT THE RULE CHANGES
The Office of the Superintendent of Financial Institutions (OSFI) has made some significant changes that will affect Canadians who are not only looking to purchase, but refinance as well. Earlier this year the Canadian Government announced a “mortgage rate stress test” which required home buyers with less than 20% down-payment, to qualify at the posted benchmark rate. Now, effective January 1, 2018, ALL (even if you have more than 20% down) Canadians purchasing a home or refinancing their existing mortgage will be required to qualify at either the posted benchmark rate OR 2% above the obtained mortgage rate (whichever is greater), regardless of the down-payment amount.
These tightened lending rules now make it more important than ever to work with the best mortgage brokers to ensure you have secured the best terms for your personal situation.
If you obtain a signed purchase agreement prior to January 1, 2018 and a mortgage approval from a lender, or if you have a refinance mortgage approval prior to January 1, 2018, you will be exempt from the new mortgage guidelines.
EXAMPLE OF WHAT THIS MEANS FOR YOU AS A HOME BUYER
Even if you placed a 50% down-payment and secured a 5 year fixed rate at 3.39%, you would have to qualify on a rate of 5.39% (3.39% + 2% = 5.39%) OR the posted benchmark rate.
This would result in reducing the mortgage amount you would qualify for, therefore reducing the potential purchase price for a new home. On average this would bring down buying power by approximately 15%-20%.
BUYING POWER BEFORE AND AFTER JAN. 1, 2018
• Buyers have a household income is: $120,000 per year
• A down payment of up to $180,000 (min. 20% down-payment)
• 5 year fixed rate, 3.39%
• A 30 year amortization.
= Max Purchase Price $950K
With a down-payment of $190K = MAX MORTGAGE $760K
After Jan. 1, 2018:
• 5 year fixed rate, 3.39% + 2% = 5.39% OR posted benchmark rate (whichever is greater)
• A 30 year amortization
= Max Purchase Price $820k
With a down-payment of $190K = MAX MORTGAGE $630K
👉 For more information on selling your current home or purchasing a new home, get in touch with the MOE Real Estate Team below...
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