Back to Blog
18 Oct

New Mortgage Rules effective January 1st, 2018

General

Posted by: Chase and Debbie Belair

Mortgage Mortgage Rules

New mortgage rules in effect January 1st 2018 will affect your purchasing power and your ability to refinance your home.  Please don’t hesitate to contact us for further details pertinent to your specific situation.

The government (Office of the Superintendent of Financial Institutions) is implementing new mortgage rules that will reduce purchasing power on conventional purchases and refinancing of all homes. The new qualifying rules will come into effect January 1, 2018 requiring all conventional mortgages to qualify at the greater of; a rate 2% higher than the contract rate, or the qualifying rate (currently 4.89%). The new rules will impact your mortgage affordability by approximately 20%.

Example: An average family income of $100,000 translates into approximately a $500,000.00 mortgage approval at current rates. With the new rules, the example family’s ability to qualify for a mortgage will be reduced to approximately $400,000.00. For the purpose of this example, our mortgage calculations are based on a 30-year amortized mortgage and no other outstanding debts (Example assumes approved credit. Rate used is subject to change).

What does that mean for you?

  • If you are purchasing with 20% down payment or more, you must have a signed Agreement of Purchase and Sale prior to January 1 st 2018 or else your current purchasing power may be reduced by approximately 20%. To confirm: The Purchase agreement must be signed and dated prior to January 1st , 2018 to qualify under the existing rules.
  • Are you planning on consolidating debt or withdrawing equity from your home in the near future? If an investment opportunity or consolidating debt is on your mind, you may wish to consider refinancing now, prior to the qualifying rules changing on January 1st 2018, as it may not be an option in the New Year depending on your circumstances.For further information on the announcement, please visit this link to the Office of the Superintendent of Financial Institutions press release:
    http://www.osfi-bsif.gc.ca/Eng/osfi-bsif/med/Pages/B20_dft_nr.aspx

Please do not hesitate to write or call if you have any questions, concerns, or if we can be of any service to you.