OPINION: Proposed new mortgage rules will hurt your chances

Kelowna mortgage columnists say there are changes coming that will make it tougher to get a mortgage

The federal government is proposing new guidelines which will again make it more difficult to secure a mortgage. These guidelines expected to be issued in the fall will come into effect shortly after being issued. Rather than tell you about them after the fact we will elaborate on the proposed changes in the event you are thinking of purchasing a home or refinancing your home in the next few months. These proposed changes will seriously impact the amount of a mortgage you will qualify for.

The new changes will affect you if you are purchasing and have a down payment greater than 20 per cent or if you are refinancing and have 20 per cent or more equity in your home. With the recent increase in property values in Kelowna many of you may now have more than 20 per cent equity in your home and may not even be aware of that. With the new changes mortgages secured with at least 20 per cent down payment or 20 per cent equity will be subject to the same stress test that was introduced last fall for hi ratio (mortgages with less than 20 per cent down payment). You will be required to show you can withstand an increase on your mortgage rate of two per cent. Let’s say the rate you are being offered is three per cent – you will be required to qualify for a payment based on five per cent. This applies to fixed and variable rate mortgages regardless of the term you opt for.

Let’s put it into perspective: If you have an annual (or combined annual) income of $75,000 using a property valued at $600,000 as an example, prior to the new rules you would qualify to carry a mortgage of $480,000 with a monthly payment of 2018.89 (based on three per cent rate) When the new rules come into effect you will then be required to qualify for your $480,000 mortgage at a rate of five per cent and prove you will qualify to make a payment amount of $2,561.72 when your actual payment is only $2018.89. Based on your $75,000 income you will not qualify. The amount of a mortgage you will then qualify using the stress test will be substantially reduced to $380,000 or lower depending on property taxes which also play a factor in qualifying. In the scenario above keeping with your $120,000 down payment you will now only qualify to purchase a home for $500,000; $100,000.00 less.

As previously stated this stress test was put in place last fall for mortgages with a down payment of 20 per cent or less. These mortgages require mortgage insurance and CMHC say the new regulations decreased the size of the country’s insured mortgage market by about 33 per cent year over year to June 30/2017.

To add insult to injury the Bank of Canada is very serious about another rate increase and speculation is the increase could come as early as September but more likely in October. Coupling that with the new stress test and the high cost of a home today many will struggle to attain home ownership going forward.

Feedback with regard to the proposed changes can be sent via email to B.20@osfi-bsif.bc.ca

The tougher rules and qualification standards are creating a lot of confusion and misunderstanding out there. There has never been a time more when the average consumer really needs the clarity that a mortgage professional can provide. The majority of you still head to your bank but more and more people are turning to mortgage brokers because with the new rules a broker is in a much better position to offer you so many more options.

Of Prime Interest is collaboration of mortgage professionals: Trish Balaberde: 250-470-8324 trishb@creativemortgage.ca; Darwyn Sloat: 250-718-4117 dsloat@creativemortgage.ca; Christine Hawkins: 250-826-2001 christine@creativemortgage.ca.

Just Posted

The Kelowna Rockets Down Under fan connection

Three bus loads of workers from around the globe gave the Rockets an edge Wednesday

Updated: Accused in Kelowna triple murder in court today

Jacob Forman has been in custody since he was arrested and charged with second degree murder

UBCO professor awarded research chair for work with egg industry

Nathan Pelletier’s looking to improve efficiencies and reduce environmental impact of egg industry

Stewart says experience counts in Kelowna West

With a provincial byelection now set for Feb. 14, we hear from the candidates involved

Big White hits record number of visitors

The resort welcomed 495 more Australian guests this year during the holiday period than last

B.C. cougar kitten rescued after mother struck by vehicle

Conservation Officers find home for young kitten found dehydrated and frostbitten near Williams Lake

Toronto man charged in double homicide

A 66-year-old man is charged with first-degree murder in disappearance of two Toronto men

Carpet bowlers have been excluded from BC 55+ Games and Canada 55+ Games

Gold medal carpet bowling winners not able to defend their titles in 2018

UPDATE: Police launch website for unsolved murder of 13-year old B.C. girl

IHIT say no one has been arrested or charged in connection with Marrisa Shen’s death

Rural B.C. students score visit with Canadiens netminder Carey Price

Two students from the Caiboo Chilcotin can hardly wait to meet hometown hero Carey Price in Montreal.

VIDEO: Elk parade on Vancouver Island is awesome sight

They’re out in force for a morning stroll. Check out some of Youbou’s famous elk.

North Delta’s Colton Hasebe named BC Children’s Hospital Foundation’s 2018 Champion Child

Colton takes the reins from 2107 Champion Child and Tsawwassen resident Taylin McGill

LIVE: B.C. announces anti-racism funding

Ravi Kahlon said money will go to B.C. Organizing Against Racism and Hate (OARH) program

Dube, Foote pace Rockets to O.T. win

World junior gold medalists key in 4-3 victory Wednesday over Lethbridge

Most Read