Will the New Government Rules Affect Your Mortgage?

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There have been some big changes in Canada during the last few weeks. These changes are regarding the new mortgage rules that have been put in place by the Canadian Government.  As of October 17, 2016, all insured mortgages (mortgages with less than 20% down) with a term of fewer than five years must undergo a “stress test” in order to confirm a borrower’s ability to continue to make mortgage payments at a higher rate.
 
What this means for homeowners is that they will be required to show they’ll be able to pay their mortgages at a rate of 4.64%. For some homeowners who had a non-insured mortgage (a 20% down payment), these new rules will not affect them. However, many homeowners who had a five-year fixed mortgage, for example, may have been previously qualified at 2.39%. Under the new rules, these homeowners will now be stress tested at the qualifying rate of 4.64%.
 
How will this impact you? There are new criteria for conventional mortgages which homeowners must now follow. For example, a homeowner’s property must be owner occupied, hence rental properties are now excluded with these new rules. As well, the maximum amortization is now 25 years with a maximum property purchase of or below $999,999.99. Homeowners must also have a minimum credit score of 600 and a maximum gross debt service of 39% of homebuyers income and a total debt service of 44%. This is calculated by the Bank of Canada’s conventional five-year fixed posted rate.
 
This also means that you may have to rely more on your mortgage broker to navigate them through these new changes. You may also have a harder time placing your first mortgage; which can be disheartening for your family, especially in today’s economy. This might mean that you will need to scale down the type of home that you had planned to buy.  One upside to that is that it means you aren’t mortgaged to the hilt and can afford other things that are important in life, such as insurance.
 
Recent statistics claim that 33% of Canadians do not have life insurance, and often times that is due to finances.  Now is the best time to ensure you and your family are covered with life, disability and job loss insurance. With our programs, we are able to offer you different insurance options that are not currently offered through many lenders and banks.
 
To request a quote on the products we offer, click here.
Or call: 1-877-242-8820 and press 3 to speak with an insurance coordinator.