The new rules affecting high ratio mortgages are effective from October 17th, 2016.
The following are new mortgage rules for high ratio mortgages, (under 20% down payment = high ratio mortgage).
From October 17th, 2016 onwards all borrowers (including those seeking a mortgage with a 5 year or longer fixed rate, insured mortgage with a variable rate, fixed under 5 years term) will need to qualify at the benchmark rate set by the Bank of Canada (currently at 4.64%) even if the mortgage loan will carry a lower mortgage rate. The monthly payments will consider the agreed rate (not the 4.64% benchmark rate)
A $500,000.00 mortgage at an annual benchmark rate of 4.64% (This is a test rate) on a 25 years amortization will require a monthly payment of $2,806.41
A $500,000.00 mortgage at an annual contracted rate of 2.39% on a 25 years amortization will require a monthly payment of $2,212.53. (This would be the real payments)
Simply put: Well qualifying borrowers that before the new rules were able to qualify for a certain amount mortgage, will qualify for a lesser amount mortgage after October 17th, 2016 when the new rules take effect.
The periodic payments maybe the same amount as they are factoring the loan amount, the contracted mortgage rate and the amortization period, once the mortgage is approved.
What can you as a borrower interested in a mortgage do now?
- Increase considerably your down-payment.
- Increase your qualifying income.
- Look for an alternative property.
- Try to keep your debt low and your credit high.
As of October 17, 2016, all insured mortgages regardless of the term must be qualified at the Bank of Canada Benchmark rule (currently at 4.64%)
What should you do at this moment?
There is no one single financial move as each borrower has different needs and different circumstances, however with you should apply on line now, call or text 416-262-7139and request a confidential one on one meeting to look at specific answers and help you get the best mortgage deal. Delays to take action may cost you! Don’t delay!
The new refinancing rules have been postponed to start taking effect on May 1, 2017,
Do you have questions or need assistance with your mortgage?