If you are planning on purchasing property, there are always a few things to consider since this will be a big investment to make. That’s why you should know about the new proposed mortgage rules that were proposed by the Office of the Superintendent of Financial Institutions (OSFI). These regulations were previously released in draft form, and they are now official as of January 1st, 2018.
With increasing mortgage rates and levels of household debt, maintaining your financial position might be a bit more challenging from now on. This is why you should work with a professional mortgage broker who can help you to choose a mortgage that will work for you – whether you are a first-time home buyer or an existing property owner requiring a second mortgage.
First-time Home Buyers
If you are a first-time home buyer in Canada you need to familiarize yourself with all the necessary requirements in order to qualify. And with the new proposed changes, it will be even more difficult to do so. One of the first things you have to know is that you’ll need to prove that you will be able to withstand a two percent increase in your annual mortgage rate. This will apply to all mortgages, regardless of the term.
But mortgage rates are not the only thing that first-time home buyers should be aware of. The majority of first-time home buyers in Canada has to pay extra for their mortgage insurance, and they have been undergoing additional stress tests on their finances for the last year or so. However, people who are able to put down more than 20 percent as a lump sum when they take out a mortgage, don’t have to purchase any additional insurance at the moment.
In addition to that, people need to prove they can handle increases in their mortgage rates every year. As mentioned above, you’ll need to show you can handle around two percent per year, which doesn’t sound like much. But if you take a million-dollar home as an example, with a 20 percent down payment, you’ll have to prove that you’ll be able to pay around $860 per month.
The Bank of Canada hasn’t increased its rates in seven years, which is also one of the reasons why these changes were proposed. The aim is to reduce possible liabilities due to people who cannot afford their payments and to prevent people from purchasing property when they can’t really afford it, putting themselves in a difficult position with unnecessary debt.
If you are looking to buy a home, speak to one of our friendly advisors who can help you to determine whether or not you’ll qualify, what the mortgage rates are, and what you can reasonably afford with your current financial position. Buying a property is still one of the best investments you can make, providing that you make informed decisions.