Changes are happening to the Canadian mortgage industry that will affect a number of Edmontonians. This was an announcement from the Minister of Finance in Ottawa that took the industry by surprise and affects families’ abilities to qualify for a mortgage on their dream property – but it certainly doesn’t prevent them from qualifying for a mortgage on a great home.
Since the news was announced earlier this month, our office has been busy with people who were initially planning on holding off on their real estate investment quickly trying to qualify for a mortgage before these changes were implemented.
As of this week, the changes that have come into effect will affect individuals trying to qualify for a mortgage with less than 20% of the down payment. For these individuals and families, they will now need to qualify for their mortgage based on a “Benchmark Rate” interest rate of 4.64%. This does not mean they will have to secure their mortgage at this rate however; they simply must qualify for the mortgage at this rate, even when I am able to secure them much lower mortgage rates.
So, what do these changes really mean?
For families, these changes could mean a smaller home or not as big of a higher price point on their house. For a family with less than 20% of the down payment on a property valued at $400,000, they may now only be able to qualify for a mortgage on a home valued at $300,000, because the lending institution must now use the 4.64% interest rate. Based on your credit rating, however, you may still qualify to receive a lower interest rate on your mortgage and continue to pay that rate over the TERM rate, but the mortgage calculations will be based on the higher benchmark rate.
Do these changes affect everyone?
No, it does not. It will affect families or individuals with less than 20% down. For those with higher salaries and higher down payments, regulations remain the same.
These changes may affect people looking to buy rental properties. Their ability to buy more than one property is severely skewed, unless they have large savings.
However, mortgage rates continue to be at an all time low in Canada and these changes will not affect your ability to receive the best possible rate for you and your family on a new home.
Seek professional advice
Qualifying for a mortgage is now more challenging so it’s time for you to find an expert to help.
A mortgage broker is in a position to help people who often wouldn’t qualify for a mortgage directly from a bank, because of their limited flexibility. Brokers, however, are able to look at multiple (traditional/non-traditional) sources of income, to help you qualify for a mortgage from banks, credit unions and mortgage companies. A mortgage broker also has the flexibility in working with these multiple institutions and find solutions that work for families.
Should you wish to discuss how you can qualify for a mortgage on your next home, please contact me today through www.maxomar.ca.