New Mortgage Rules – Qualifying at 4.64%


The government has implemented these new restrictions to TRY and slow down our booming Toronto and Vancouver markets. We may see a moderation in home price appreciation year over year, that is not to say that the markets are going to decline, maybe just a slower appreciation in value (ie. Homes in the GTA increased 21% year over year.)

Essentially the changes only affect 25% of the market, being purchasers placing less than 20% down. When placing 20% or less it will cause your lender to require mortgage insurance. The new rules directly affect this group, and will limit their spending.

When it comes to the market, the most important thing to remember is that this whole thing is about demand, and we have to remember that housing inventory is still down 30% year over year.

The qualifying rate 4.64% is much different than the contract rate, typically about 2.44% (the actual amount) Meaning the amount people are paying for borrowed money does not change. Meaning affordability stays the same. Also important to note is the Bank of Canada rate has stayed at 0.5%, nothing has changed there to slow down/ speed up markets. This Drives the Prime lending rate; the bank adds 2.2% = 2.7%

Ask us for an easy to understand chart to see what you would qualify for based on your income. Your GDS and TDS ratios need to work of course. Have you been pre-qualified?

Don’t forget…if you don’t have 20% down-payment it’s not the end of the world. There are always creative ways to get it done. Whether it be a loan from family to get you up to 20%, or purchasing for a lesser price. Regardless, it doesn’t cost anything to get pre-qualified, so I highly recommend it so you know where you stand, and we can come up with a game plan.

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