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A VIP update on Lending Practices for those considering to buy in the near future: Recently the Office of the Superintendent of Financial Institutions (OSFI) released revised guidelines for the mortgage industry. 

These new parameters will take effect January 1, 2018. 

See Robert McLister’s Globe & Mail Article on 10 ways new rules will effect us:

Below are comments & examples of impact from a Mortgage Broker:

These new guidelines include a stress test for uninsured mortgages or mortgages with more than a 20% down payment or 20% in existing equity.

This new stress test means that borrowers will be qualified at the greater of their contract rate + 2% or the five year benchmark rate published by the Bank of Canada, which is currently 4.89%.

To give you some numbers, per $100,000 in mortgages.

Based on an interest rate of 3.29% with a 25yr amortization.
Mortgage Payment - $488.25 (3.29%)
Benchmark Rate Payment - $575.36 (4.89%)
Stress Test Payment - $598.22 (5.29%)

Lenders determine how much money you can borrow by determining what percentage of your income can go towards your mortgage and debt payments. The new requirement will determine the mortgage payment based on the higher of the benchmark rate or stress test rate, even though your contract rate is 3.29%. This will reduce your maximum allowable mortgage by approximately 20%.

CBC news article: http://www.cbc.ca/news/business/osfi-mortgage-rules-1.4358048

If you have any questions, please give me a call: 7804997720

John J Fraser, REALTOR® www.jfsells.com

Maxwell Challenge Realty | Email: John@jfsells.com | fb.com/edmontonrealtypro

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