From 1st January 2018, the Canadians who are getting a mortgage, or renewing their old one, or refinancing their mortgage may require proving that they have enough ability to cope with the rising rates which are considerably higher than their contract rate. The new rules were announced by the federal financial regulator of Canada in October and this means that the borrowers who can even pay down 20% will now have to go through a stress test as it has been since 2017, January, particularly for the borrowers who have smaller down payments.
The state of Ottawa has already started taking steps to make the rules stronger and stricter around the mortgage market with a series of regulatory changes which are aimed at controlling the total amount of debt that the Canadians and the institutions take on. This turn taken on the Canadians can have a huge impact.
Read on to know how these new guidelines will set an impact on you.
If you plan to purchase a house with a 20% down payment in 2018
Having to qualify for the stress test clearly means that the banks will vet your application for a mortgage by utilizing a qualifying rate that’s equal to the greater of the Bank of Canada or their contractual rate. So, if you’re going out for house-hunting in the coming year, you might have to settle down for a home that costs less than what you could buy today. Or you would have to wait and save more for making a bigger down payment.
If you’re renewing your home loan in 2018
The lenders don’t require applying the stress test on the clients who are renewing their already existing mortgage loan. This clearly means that in case you don’t qualify for the stress test, you will get stuck while renewing your loan with the current bank without being allowed to shop for a better rate. There are some cases where renewing borrowers will be forced to take the unreasonable rates from the present lenders.
If you’re refinancing your mortgage
In case you’re planning on refinancing your home loan, you will require qualifying according to the high-stress state rates rather than the current contractual mortgage rate. Today, your lender would ensure that you can take out the best possible loan amount at the most comfortable rate.
All about credit unions
The OSFI or the Office of the Superintendent of Financial Institutions rules usually apply only to the financial institutions that are regulated by the federal government. This means that Canadians should be able to continue borrowing money without taking a stress test if they take resort to credit unions that are provincially regulated.
Therefore if you’re a prospective mortgage borrower in 2018, you should make sure you have saved enough money for making the required down payment so that you can qualify through the stress test and end up with the loan of your choice.