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October 17, 2016 is a critical date - changes to mortgage insurance rules were announced by the federal government and will take effect that day. Do you understand the changes and how they will impact your clients and the real estate industry?


Mortgage insurance rules will change to require all insured mortgages to undergo a ‘stress test’ from the lender. That test will require the buyer to qualify for a mortgage at the Bank of Canada posted rate, currently 4.64%, even though they would still receive the contract rate.


The buying power of the client will be lowered by the need to qualify at the higher rate.


Example (as provided by a mortgage professional)


Family A is qualifying for a mortgage using the following information:

Current Annual Family Income $87,000
Household Debt Payments $700 per month
Property Tax Payments $3,000 per month
Down Payment 5%
Mortgage Rate 2.49%


Result:

  • Qualifying for a mortgage today, Family A qualifies for a purchase price of $450,000.
  • Qualifying for a mortgage after October 17, 2016, given the need to qualify at the Bank of Canada rate of 4.64%, Family A qualifies for a purchase price of $360,000.

Questions

Ask your clients to speak with a mortgage professional about their circumstances. In many cases, the changes will affect their buying power and adjustments may need to be made to their search criteria.


Accepted Offers to Purchase signed before October 17, 2016 will qualify under the current rules provided that the mortgage is funded by March 1, 2017.


Information provided by the Alberta Real Estate Association.

Data supplied by CREB®’s MLS ® System. CREB® is the owner of the copyright in its MLS® System. The Listing data is deemed reliable but is not guaranteed accurate by CREB®.
The trademarks MLS®, Multiple Listing Service® and the associated logos are owned by The Canadian Real Estate Association (CREA) and identify the quality of services provided by real estate professionals who are members of CREA. Used under license.
The trademarks REALTOR®, REALTORS®, and the REALTOR® logo are controlled by The Canadian Real Estate Association (CREA) and identify real estate professionals who are members of CREA. Used under license.