On Tuesday OSFI (Office of the Superintendent of Financial Institutions) released the final draft of the new mortgage qualifications. The new rule says you must prove you can withstand a 2% increase in your mortgage payments. As a mortgage holder if your interest rate is 3% you must prove you can afford your home at an interest rate of up to 5%.
The regulation applies to people who are able to make more than a 20% down payment. Now the rules for borrowers who are able to put less than 20% down very similar to those who can put more than 20% down.
Calling all homeowners and prospective homeowner? Keep reading as the regulations will likely have an impact on you.
Borrowers will have less flexibility
If you want to switch lenders after your current term you have to be re-qualified (aka able to pay interest rate plus 2%). If you are not qualified your only option will be your current lender. This gives lenders all the power and you very little (unless you go to a credit union).
Alternative mortgage lenders
OSFI only regulates our banks so this will not have an impact on credit unions and some other smaller lenders. These lenders do not have the same regulations and you have been classified as ‘risky’. You are likely to be charged a higher interest rate and could even need a 30-year (versus a 25-year) mortgage.
Deferred home purchases
Stricter requirements will make it more difficult or impossible for many people to buy a home. With the stricter rules many people will have to save more for a down payment to qualify for the house they love.
Links for more information
All the details OSFI released.
Rate Supermarket lets you play with the variables to see how you will be impacted.