If you’re looking into the option of buying a house, you probably already know that the Mortgage Rules have changed recently, and you’re probably concerned.
What is this new rule anyway?
“Effective October 17th all high ratio buyers will have to qualify at the benchmark rate for all terms.”
And just what does that even mean?
It means that you’ll have to qualify for a higher interest rate than what you’ll actually end up paying, which will reduce the dollar amount for which you’ll qualify.
Dominion Lending Centres gives this example:
“… a home buyer currently qualified to purchase with 10% down for a mortgage of $527,000. After October 17th, this home buyer would qualify for a $420,000 mortgage. This equates to a 20% drop in buying power. (All things being equal in terms of property taxes, income, debts, etc).”
So what do we do?
In this situation, you have a few of options:
- Make up for the shortfall with more money down; or
- Add another person to the mortgage to help qualify; or
- Purchase a lower priced property
But mostly…talk with your REALTOR® Ann Hayes, and your mortgage professional about your options.
So what’s the purpose all this?
Well, the new mortgage rules will likely reduce the risk of a housing crash. The government and the banks are looking out for own interests in keeping the housing market going, but in looking out for their own, they’re also looking out for yours. Qualifying for a lower amount might just put less stress on your wallet. That can’t be too bad.