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10 Nov

B20 Demystified. Mortgage Market Update November 10, 2107


Posted by: Anne Martin

B20 DEMYSTIFIED  The office of the Superintendent of Financial Institutions (OFSI) announced some regulatory changes on October 17, 2017. There were 3 changes announced, but it was the introduction of a qualifying rate stress test to all non-insured mortgages that will have the most impact on consumers.Home Buyers with a down payment of 20% or more must now qualify at a new minimum qualifying rate, which is the greater of the five year Bank of Canada Benchmark rate or the lender contractual rate +2%

What does this mean?

The biggest impact will be on the amount in which the homebuyer will be able to qualify. For example, if a homebuyer needs a $400,000 mortgage, has 20% down payment and a 25 year amortization, here is the difference:

Actual Rate to be Paid:            To Qualify:
Mortgage Amount $400,000 Contract rate 3.49%  The greater of the two: 4.99%, the current BOC Benchmark Rate OR 3.49% contract rate + 2%,WHICHEVER IS HIGHER = 5.49%
Monthly Payment for Debt Ratio Qualification $1994.98   $2439.24
Minimum Income Requred to Qualify $76,724.12   $90,052.14

E & OE – rates shown are subject to changing market conditions and OAC

To recap:

Uninsured Mortgages- Homebuyers/owners will now have to qualify for a mortgage using the benchmark rate, which is the Bank of Canada rate (currently 4.99%) or the lender rate + 2%, whichever is greater.

Insured Mortgage- Homebuyers must qualify using the Bank of Canada Rate (again, currently 4.99%). This came into effect in 2016 and has not been affected by the recent rule changes.

Can you still refinance your home? – yes. Homebuyers still can refinance up to 80% of the value of the property but the new stress test applies.

What if you have a contract written prior to October 17, 2017? – This depends on the lender. Some lenders will use current rules up to January 1, 2018. Others will implement the necessary changes before this deadline.

Best fixed rates are as low as *2.84 – 3.49 % for a 5 year fixed,
variable rate mortgages from as low as p-.85%
Prime Rate is 3.20%

*High Ratio/Quick Close Specials
This is a critical time to sit down and review your household financing needs. Please do not hesitate to contact me should you have any questions.

If you are in the market for a home, book an appointment today to see how the recent regulatory changes by the Office of Superintendent of Financial Institutions will affect your purchase.

**rates subject to change with market conditions – *OAC  **conditions apply E. & O. E.

Terms Bank Rates Our Rates
6 Month 3.14% 3.10%
1 YEAR 3.04% 2.89%
2 YEARS 3.24% 2.54%
3 YEARS 3.44% 2.64%
4 YEARS 3.89% 2.84%
5 YEARS 4.99% *2.84 – 3.49 %
7 YEARS 5.30% 3.44%
10 YEARS 6.10% 3.74%
Rates are subject to change without notice. *OAC E&OE
 **Please note that rates shown above are subject to change without notice. The rates shown are  posted rates and the actual rate you receive may be different, depending upon your personal financial situation. “Some conditions may apply. Rates may vary from Province to Province. Rates subject to change without notice. *O.A.C. E.& O.E.”