MORTGAGE QUALIFICATION CHANGES

MORTGAGE QUALIFICATION CHANGES    

The Financial Forum can best guide and counsel you through your mortgage needs

On October 17th, new housing policies came into effect and have left many Canadians unclear about how these have impacted them. Outlined below is a very clear and concise summation of how you have been affected.

HOW DO THE CHANGES AFFECT YOU?

20% – Approximate decrease in home purchasing power for all Canadians

High Ratio Mortgages

For home buyers with less than 20% down payment, mortgage qualification will be based on the Bank of Canada posted rate.

This is to stress test borrowers, as Bank of Canada rates are higher than the rates offered by banks and lenders.

Low Ratio Mortgages

Until November 30th, 2017 all remains the same for home buyers with a down payment of 20% or more.

Specifically, borrowers with down payments of 20% or more will still be able to qualify for mortgages using the contract rate – unless the mortgage has a term of 4 years or less and/or is a variable rate mortgage, which are subject to the new Mortgage Qualifying Rate.

UNDERSTANDING KEY MORTGAGE TERMS

HIGH RATIO MORTGAGE – A mortgage in which the borrower has a down payment of less than 20% of the purchase price

LOW RATIO MORTGAGE – A mortgage in which the borrower has a down payment equivalent to 20% or more of the purchase price

MORTGAGE QUALIFYING RATE – The Bank of Canada conventional 5 year fixed posted rate. On average, 2% higher than rates offered by lenders.

CONTRACT RATE – The rate offered by the Lender. The borrower’s actual mortgage payments are based on this rate.

 

AFFORDABILITY TABLE WITH HIG H RATIO QUALIFICATION RULES

 

Maximum House Price

ANNUAL INCOME

$50,000

Maximum House Price

BEFORE OCTOBER  17

$266,400

Maximum House Price

AFTER OCTOBER  17

$211,300

 

$60,000

 

$331,000

 

$268,312

 

$70,000

 

$384,500

 

$328,304

 

$80,000

 

$443,350

$378,464

 

$90,000

 

$502,341

$428.622

 

$100,000

 

$561,300

$478,780

 

$110,000

 

$620,300

 

$484,000

Calculations based on the following: 5% down payment, no household debts, based on 25 yr amortization period. Data is for information only, should not be relied upon without verification.

Have any questions, need any advice? Visit us at www.thefinancialforum.ca. Email us at mortgages@thefinancialforum.ca. Call us at (905) 265-0246.

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