New Mortgage Rules in a nutshell: The Who, What, Why and How!
For the video transcript about the new mortgage rules, click on this down arrow.
Who will be affected by these new rules?
What did they change?
There are several factors in the new rules, but the main one I want to focus on is the new qualification level. Under the old system, buyers would get qualified for the interest rates they can get from a bank or lender.
Under the new rules. Buyers need to qualify for the POSTED rates.
SO while a buyer can get 2.4% from some lenders, they need to qualify for the posted rate This rate is currently around 4.6%
Why did they create these new mortgage rules?
The government is concerned about Canadians over-extending themselves credit-wise. Entry level homes in Toronto and Vancouver might be $600K, and a first time buyer might qualify at the current 2.4% interest rate.
But what if rates go up half a point, or even a whole percent? Those same buyers might be house poor, and could even lose their home if they are unable to make the new payments.
On that note, current rates are at an all-time low. I saw an interest rate chart that went back to 1776 in the U.S., and the average rate historically was around 6%. So it's not a matter of IF interest rates will rise, it's a matter of when.
How will this affect home buyers?
For example, if under the old system a buyer would be qualified for a $300,000 home at 2.4%, that same buyer would now only qualify for a $250,000 home.
To put another way, lets assume you were buying a $350,000 home. Under the old system you would need to have an annual income of $60,000. Under the new rules, your annual income would need to be $73,000.
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About the PublisherBo Kauffmann is a residential real estate agent with over 18 yrs experience in helping buyers and sellers achieve their goals. Inducted into the REMAX Hall of Fame in 2010 and receiving the REMAX Lifetime Achievement Award in 2019, Bo has sold over 500 houses and condos in the Greater Winnipeg market. He is an accredited buyer representative (A.B.R.) and a Luxury Home Marketing Specialist. Bo provides exceptional service to First-Time Home-Buyers, Seniors looking to downsize and Home Sellers of all ages. He can be reached easily By E-Mail or call/text him Call/Text Here
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