TGIF: NOW is the Time for Preapprovals!
As our leaves turn colour and autumn rains begin, so turns our market. The largest difference for buyers is the change in mortgage lending rules for 2018, just introduced by the Office of the Superintendent of Financial Institutions (OSFI). This “stress test” sets a new minimum qualifying rate for uninsured mortgages ( customers with down payments 20% or greater than their home price). The minimum qualifying rate for the uninsured mortgages will be 4.89% ( the 5 yr benchmark rate) or 200 basis points above the consumer’s contractual mortgage rate. No matter how much money they put down, even first-time buyers will have to pass the stress test.
According to Ratehub.ca’s mortgage affordability calculator, a family with an annual income of $100,000 with a 20% down payment at a 5 yr. fixed rate of 2.83% amortized over 25 yrs can currently afford a home worth $726,939. Under the new rules, qualifying at 4.89% , they can now afford a price of $570,970 ( a 21.45% difference). It is more important than ever to get an offical preapproval before you start househunting - avoiding a nasty shock later. So... there will be buyers putting a purchase on hold until their income increases or buying a condo instead of a townhouse, a townhouse instead of a detached home. This will prove to be hiccup until it becomes the norm and buyers adjust.
This comes on top of a slower detached market with prices reflecting the reality of the 15% foreign buyers tax, plus a balance in the supply & demand situation. Condos and townhomes are still driving the market with mind boggling sale prices. This could change with the new mortgage rules and downsizers unable to achieve the same sale price for their homes. CHIP reverse mortgages are a creative vehicle for seniors who want to stay in their homes at the same time benefiting from the huge equity in their homes on a monthly basis.
Having a meeting with your professional mortgage advisor would provide the answers to the many questions raised by new rules and the alternatives. Please call us if you are wondering about how all of this affects you, or about the value of your home during these shifting times. Enjoy this year’s colourful Fall.
We always have you covered even in uncertain moments.
-Michelle, Sheila & Shane
“You cannot change the circumstances, the seasons, or the wind, but you can change yourself. That is something you have charge of” - Jim Rohn
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