Approved For $400,000? Check Again...
We all know that Finance Minister Bill Morneau, announced new mortgage and housing rules on Monday, so we caught up with Mortgage Specialist, Margaret Adekunle of Marg Mortgages. We asked her a few questions to help us get an overview of the upcoming changes and how it affects us.
BERET: How will the qualification standards for high ratio (insured) mortgages impact for buyers?
Margaret: The new qualification standards mean that buyers have to qualify at a higher interest rate. Right now, lenders are qualifying buyers based on a discounted rate of 2.44% for a 5 year fixed mortgage, regardless of the posted rate. The down side to qualifying a buyer at the posted rate is that a buyer that will qualify for a $400,000 mortgage at 2.44% will only qualify for a mortgage of $320,000 at 4.64%
BERET: What does October 17th mean to buyers without existing mortgage approvals?
Margaret: A buyer without an approval by October 17th will have to qualify under the new rule. The 4.64 qualification rate means a higher mortgage payment will be used in the calculation process. The fact remains that the lower your interest rate, the easier it will be for a buyer to qualify for the mortgage. Although lenders have outlined the 17th as a cut off, it’s our experience that anytime a major change comes into effect, all lenders become very back logged. It is prudent for anyone to get their application in as soon as possible.
BERET: We heard something about mortgages having to be funded by March 2017; can you elaborate on that deadline?
Any existing approvals in place will be honoured by lenders - however, they must fund by March 1st 2017 or they will be subject to new qualification standards.
BERET: What does all this mean?
Margaret: Approved for a mortgage of $400,000? Not after October 17, 2016. Under the new rules, you can now afford $320,000. With this taking effect, if you are looking to buy any sort of real estate now may be the time.
Have more questions or want to jump start your approval process ASAP, hit reply or call/text us at (780) 232.4915