New Mortgage Insurance Rules
Tuesday, October 18th, 2016In case you haven’t heard, as of Oct.17/2016 a new, stricter, mortgage lending rule came into effect. It is in response to years of lower mortgage rates and serves to limit potential buyers total debt load.
In short, a buyer in the past would typically only need to be approved for a mortgage amount based on what their interest rate will be (for example, a typical rate at this time would be around 2.49%) . However, even though your interest rate would be that low, you will have to be approved as if it were the current Bank of Canada fixed rate of 4.64%. This will ultimately effect the total amount of money you are able to borrow.
Here is an example listed by the Alberta Real Estate Association:
Family A is qualifying for a mortgage using the following information:
| Current Annual Family Income | $87,000 |
| Household Debt Payments | $700 per month |
| Property Tax Payments | $3,000 per year |
| Down Payment | 5% |
| Mortgage Rate | 2.49% |
Result:
- Qualifying for a mortgage and applying for mortgage insurance under previous rules, Family A qualifies for a purchase price of $450,000.
- Qualifying for a mortgage and applying for mortgage insurance after October 17, 2016, given the need to qualify at the Bank of Canada rate of 4.64%, Family A qualifies for a purchase price of $360,000.
For more information, I recommend you speak with your mortgage lender to see how this may effect your borrowing ability.
