By: Sarah A. Colucci, M.A. Mortgage Edge
Yesterday, OFSI published its dreadful mortgage changes. A new "Stress Test" for all purchasers. Home buyers will have to qualify 2% higher than the contract rate. It doesn't matter if you have 20% or more. You will be stress-tested.
What does this mean? You won't be able to qualify for as much mortgage as you want. Heck, you may not qualify at all. When the original stress test came out, 30% of buyers became extinct.
Let's think this through since OFSI hasn't. Can you qualify for a mortgage in January? If real estate prices drop 25% after January and interest rates rise, can you get financing? The Government is on a destructive path. Take the next couple of months to sort through your finances. Ask yourself the following:
1. Can I pass the stress-test for the home I want to buy?
2. Do I need to move or consolidate any debt right? Would I qualify for a mortgage at 2% higher?
OSFI SETS NEW RULES FOR MORTGAGE LENDING - ARTICLE - BNN
Other changes include restrictions on co-lending, or bundled mortgages -- in which federally regulated lenders pair up with unregulated providers to finance a property -- aimed at ensuring financial institutions do not circumvent rules that limit how much they can lend. Federally regulated financial institutions must also establish and adhere to loan-to-value ratio limits that are updated as housing markets and economic dynamics evolve. The broad thrust of the final guidelines are similar to what OSFI had proposed in July, when the regulator put out a draft for public consultation. The proposed changes were criticized for potentially increasing costs and limiting access to mortgages for some buyers. The Fraser Institute, an independent, non-partisan think tank which tends to prefer free-market policies, said last week that a stress test for uninsured mortgages was unnecessary and could do more harm than good.
In-text: (BNN, 2017)
BNN. (2017). OSFI sets new rules for mortgage lending - Article - BNN. [online] Available at: http://www.bnn.ca/osfi-sets-new-rules-for-mortgage-lending-1.887025 [Accessed 18 Oct. 2017].
By: Sarah Colucci
Senior Mortgage Agent, Lic. M14000929