Qualifying for a Mortgage Just Got Tighter
Yesterday, Finance Minister, Bill Morneau, announced new rules that serve as another attempt to slow the housing market. At this point it has only addressed buyers looking to purchase with less than a 20% down payment.
Here are the details:
As of October 17th, all mortgages, regardless of the term, will need to be qualified at 4.64%. This is called the benchmark rate. The government essentially is only allowing lending up to what a client can afford if rates were at 4.64%, even if their interest rate is much lower.
1-4 year terms, and variable rate terms have always qualified at the benchmark rate, but now the 5 year term that most buyers would take with less than 20% down is facing the same scrutiny.
Important to Know:
- Clients who already have accepted offers with a firm mortgage approval prior to Oct 17th are exempt from this new qualifying rate, as long as the completion date is prior to March 1, 2017. They will still have to pay the insurance premiums and they have not changed. A maximum amortization of 25 years still remains in effect.
Action to Take:
- If you have an accepted offer on a home, make sure you have a mortgage approval prior to Oct 17th.
- If you are in the market and shopping, try to get your offer accepted in the next few days in order to qualify as per current guidelines.
- If you are shopping and likely won’t have an accepted offer by Oct 17th, call your mortgage broker to find out what you qualify for based on the new change.
Posted by Alana Myers
on October 4, 2016