New Canadian mortgage regulations and what that means for home buyers? Canadian home buyers have faced many new rules in the last year. The Office of Superintendents of Financial Institutions has implemented more rules which take effect January 1st 2018.
We won’t go into all the details here, but lets review the Cole’s Notes version.
All conventional and insured mortgages must be qualified at the contract rate PLUS 2.00%. We have had this for insured mortgages since November. It means about a 20% decrease in purchase capability for high ratio mortgages. It will be close to the same now for conventional mortgages.
For those qualifying for a new line of credit it means qualifying at prime plus .50 to 1.00% then adding 2% more. Prime is 3.20%, add .50 for a LOC. This means everyone must qualify at 5.70% now. Compared to 4.89% the industry use now. That will reduce the size of future LOCs.
For clients with hard to prove income or damaged credit, the rates start in the 5% range as of October 23, 2017. Under the new rules the lender now has to qualify at 5% plus 2% or 7%. Reduced purchase capability again.
Some self employed folks were allowed to do equity deals that had two mortgages. One for 75% of the value and another for up to 15% from a second mortgage lender. This allowed them a year or two to correct income or credit issues. These will no longer be allowed under the new regulations.
These new rules will no doubt hurt conventional lending in 2018 and into the future.
To find out what your new mortgage payment will be check out Homestoc’s detailed mortgage calculator.