By the end of October we should know what the proposed changes to mortgage qualifications will be. It is anticipated that the changes will take effect in January 2018. In July 2017, the Office of the Superintendent of Financial Commissions (OFSI) announced it will be increasing it’s supervisory efforts for residential mortgage underwriting specifically focusing on B-20 Guidelines.
This proposed change is said to have the biggest impact on the housing market:
Requiring a qualifying stress test for all uninsured mortgages; (that is regardless of down payment amount)
What is the proposed qualifying stress test rate for uninsured mortgages?
All borrowers regardless of how much down payment would have to qualify at a rate 2% above the contract rate. As of today that rate is 5.34% for a 5 year fixed term. Although the proposed changes are OFSI regulated we expect that all lenders would follow suit in due course.
At this time borrowers are not required to re-qualify at renewal unless there is a material change such as change in title, mortgage amount, lender etc.
How much will these changes impact you?
On average you will qualify for about 25% less mortgage amount than you do today.
E.G. if you qualified for a $400,000 mortgage today, you will only qualify for a $300,000 mortgage after the proposed stress test to all mortgages is implemented.
How does the stress test on all mortgages impact you?
Today if you have more than 20% down payment/equity you can qualify for a 5 year fixed term at the contract rate e.g. 5 year fixed rate today is 3.34% instead of 5.34% under new proposed changes.
Qualifying for a mortgage will be based on your income such as employment, proven business and pension income regardless of your excellent credit score, net worth, down payment amount or long standing good relationship with your bank.
What can you do?
If you are looking at making a move, even downsizing, need funds to refinance for future renovations, investment, or any other reason I recommend you start the process now to ensure you will be approved even if you don’t plan on using the funds immediately.
Contact me directly to discuss your options Ph: 778-689-6843