I recently did a video explaining the new mortgage rules and it made me realize how many people aren’t aware of what’s coming in January 2018. In a nutshell, once the new mortgage rules take effect – it will reduce everyone’s affordability by about 21 per cent.
The government is rightfully concerned about the amount of debt we are carrying and in particular, mortgage debt. After a decade of dramatically rising house prices and low interest rates, many Canadian consumers got themselves into some pretty serious mortgages. And of course as expected, interest rates are starting to rise.
The government’s solution is to put all potential buyers through a “stress test” to make sure they can afford their mortgage if and when the rates rise. So, everyone who wants a mortgage beginning in January will be qualified on the Bank of Canada’s benchmark rate (currently 4.89 per cent) – or 2 per cent higher than their bank’s current contracted rate.
As an example – let’s look at a family who has an annual income of $100,000. Today, with a fixed-rate 25-year mortgage at 2.84 per cent, they can afford a house worth up to $726,145. Beginning in January, with the same scenario – that family will only qualify for a mortgage of $579,731.
And by the way this applies to anyone who is refinancing their mortgage.
So please – if you’re thinking of buying in the near future – take the time to speak with someone to understand your situation so you can determine your options. Reach out any time to discuss.
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