What are the new Mortgage Rules 2018?

What are the new Mortgage Rules 2018?

Every New Year is a season to rejoice and look forward to in hope. We are just a few weeks into the New Year. At the start of this year, the new mortgage rules as imposed by the OFSI (Office of the Superintendent of Financial Institutions) took effect.

If you are planning on buying a house, this year, you need to familiarize the changes made and the impact it may have. In the new regulations, both the uninsured and insured borrowers have to face a stress test. It doesn’t matter how much you put as down payment.

What does it involve?

• Scenario One

When applying for a mortgage, the potential lender needs to vet your application using the minimum rate for qualifying. That is the five-year benchmark rate by the Bank of Canada.

• Scenario Two

Also, the Lender can vet you at a higher rate by two percent of the actual mortgage rate. The choice between which of the two will depend on the higher interest rate.

This move by the OFSI aims at stimulating the financial situation of the borrower. The test will also apply to mortgage renewals, and specifically to those who will be looking to renew with another lender other than the existing one.

What are the options for one who doesn’t pass the stress test?
You will have several options to choose from if you fail the test. That includes:
 Adding more money towards your down payment
 Wait longer to become a homeowner
 Look for a cosigner

It’s is no debate that these regulations will affect the ability of would-be homeowners to buy their dream homes. Some will have to settle for homes at a lower price than what they would have afforded before the rules were enacted.

Also, you may have to forgo the lenders who are federally regulated, as they are the ones who have to abide by these regulations. If you are lost on how to find a mortgage that meets your needs, you can contact our experienced team of experts in the mortgage industry at GT mortgages.