I wanted to share with you a recent announcement affecting the real estate market, and how it may impact many people looking to obtain mortgage financing after Jan 1, 2018. The more you know the better prepared you will be, and buying before Jan 1st may be very beneficial to you.
Stress Test for all mortgages regardless of the amount of equity. Today only High ratio mortgages (80% loan to value or greater) must meet the Stress Test requirement. The Stress Test rate is the rate, high ratio mortgages currently must qualify at, regardless of the actual mortgage rate you get.
Current Stress Test is based on the 5 year Bank of Canada bench mark rate of 4.89% (this is the same for all lenders). The new Stress Test will be based on the greater of the actual rate plus 2%, or the 5 year Bank of Canada bench mark rate.
- example: Current 5 year rates today range from roughly 2.99% to 3.39%, so they would have to qualify at 4.99 to 5.39% which is higher than the current bench mark rate of 4.89%.
How does this impact you?
- Conventional example: if you qualified for a $400,000 conventional mortgage today, at 3.29% amortized over 25 years, January 1st you will qualify for a $326,000 mortgage. This is an 18.5% decrease in mortgage amount.
- High ratio example: if you qualified for a $400,000 high ratio mortgage today, at 3.09% amortized over 25 years, January 1st you will qualify for a $392,000 mortgage. This is a 2% decrease in mortgage amount.
If you wish to discuss how these changes will affect you, and discuss your buying or selling options, please contact me at firstname.lastname@example.org.