Here’s what you need to know.
Effective October 17th, “Under the new rules, all borrowers who have insured mortgages will have to qualify at the Bank of Canada posted rate, which is now significantly higher than the discounted mortgage rates offered by most lenders.”
Currently and up to the effective date, borrowers could choose to take a 5 yr fixed rate term (example 2.39%) or longer and use that rate to qualify them, therefore allowing the purchaser to have higher purchasing power.
However, should the client require a shorter term (less than 5 yrs) or a variable rate, they have to qualify using the Benchmark Rate (today 4.64%). Once qualified and approved, they were free to choose whatever term/rate they requested.
Let’s use an example of an individual who makes an annual income of $80,000/year. Using a 5yr fixed rate of 2.39% they would qualify to purchase a home for approximately $500 000.00 putting 5% down payment.
The new rules will change the amount the client will be approved for. With the same $80,000/year income and 5% down, the client will now only qualify for an approximate home purchase of $405 000.00. This will be because the qualifier rate used will be the Bank of Canada benchmark rate of 4.64%.
This may have a great impact on any preapprovals. Please contact us for any questions or concerns.
Call: 780-238-2896
Email: contact@themortgageminds.ca
Or click to visit our website: The Mortgage Minds
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