On October 4, 2016 Finance Minister Morneau announced that there would be upcoming changes to insured Mortgages. These changes will be rolled out on the following two dates:
October 17, 2016 – All insured Mortgages will be required to qualify using the Bank of Canada’s 5-year Benchmark Rate. Although this is something that lenders and borrowers have already been accustomed to for the past couple years on Mortgage terms less than 5 years; now even the 5-year fixed term will require qualification using the 5-year Benchmark Rate.
For all home buyers who do not have a 20% down-payment, they will continue to require an insured Mortgage. However, even though the contract rate may offer a low rate such as 2.49%, the rate used for qualification purposes would be 4.64% based on the current 5-year Benchmark Rate. This new calculation overinflates the borrower’s mortgage payment for qualifying purposes, making it more challenging to qualify for a larger mortgage. Borrowers will either need to save for a larger down-payment or consider purchasing a more affordable home to qualify under the established Benchmark Rate.
November 30, 2016 – There will be increased qualification standards on portfolio-insured Mortgages, such as 25-year amortization max, rental and investment properties and Mortgages exceeding $1million which will no longer be portfolio-insured.
How Are Credit Union Members Affected by this?
Members will likely find that this has little impact on their ability to qualify for a Mortgage with the Credit Union, as we do not normally portfolio-insure. More details on these increased qualifications are still pending from our insurer.
Why is this happening?!
Regulators believe that these changes to mortgage qualification rules are based on the Government’s attempt to cool the heated housing market, without raising interest rates which could negatively affect the economy as a whole.
Please contact the Credit Union to discuss your Mortgage needs, to determine how these changes may affect your eligibility for a Mortgage with the Credit Union. We strive to help make your dream home a reality. Please call us today at 416-238-5606 and let’s get ready to start the process!
For more information on these and other changes, visit: http://www.fin.gc.ca/n16/data/16-117_2-eng.asp