As of October 17, 2016 mortgage qualifying rules changed in several significant ways. We wanted to make sure we had the accurate details, so we went to one of our trusted mortgage brokers, Jason Scott, to get the details.
He outlined what changes were made to the mortgage rules and how they can affect you.
- Regardless of the length of the term, any insured mortgage (usually having a down payment of less than 20%) must now qualify using the Bank of Canada benchmark rate which is currently 4.64%. Prior to this five year fixed rate mortgages qualified at the actual mortgage contract rate, for example 2.49 per cent in recent weeks. The effect is that buyers’ purchasing power has been reduced by about 20%. Conventional five year fixed rate mortgages will still qualify at the contract rate at some lenders.
- Rental properties mortgages and refinances are no longer allowed to be securitized by lenders. This will drive up interest rate costs for these types of mortgages.
- Insured mortgages that are up for renewal must qualify at 4.64% if the buyer is looking to move to a new lender. This will make it harder to switch lenders and you may end up being offered higher rates.
- The maximum amortization for all insured mortgages is now 25 years. Previously 30 and 35-year amortizations were allowed in certain situations.
- Capital gains exemptions on principal residence will apply only to Canadian residents.
Jason Scott is the author of Approved!
Mortgage Advice for All Stages of Life
and is based in Edmonton.