New mortgage rules came into place on January 1st of this year. But what does this mean for your home buying process? Whether you are looking for a new home or renewing your mortgage, we have some information to help you understand how these changes may affect you.
I have less than a 20% down payment
If you’re house-hunting and you have less than 20% for a down payment, the current rules will apply: your bank will test your ability to pay your mortgage at the Bank of Canada’s five-year fixed rate.
I have more than a 20% down payment
For those in the market for a new home, if you have more than 20% for your down payment, the new stress test will apply to you. This means that you will be tested to ensure that you can afford your mortgage payments should there be an increase in interest rates. This will be done so by using the higher of either the Bank of Canada’s five-year benchmark rate or your mortgage interest rate + 2%.
If you were pre-approved for a mortgage before January 1st, 2018 the rules will not apply to you if you purchase a home before that pre-approval expires. Some lenders will give you 120 days starting on January 1st to buy your home without the new rules applying to you.
I am renewing my mortgage
If you’re renewing your mortgage at the bank where you are currently borrowing from, the new stress test rules won’t apply to you. However, if you choose to shop around and switch lenders, you’ll be treated as a new customer and you will have qualify at the rate of the stress test.
Do you still have questions? TD Canada Trust has a great infographic to walk you through the changes, if not, feel free to contact a Rohit Communities area sales manager at any of our showhomes and they can work with you and our mortgage partners to help you understand the process.
