Paulette Maltais 780-907-4550

Provided by the Alberta Real Estate Association

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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.
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printed from Alberta Real Estate Association newsletter

** ATTENTION,

If you are looking to buy Real Estate please keep reading…

After several years of the Bank of Canada changing the rules to home buying/qualifications, this new rule change today will hurt the housing market in my opinion. This will slow home buying and drop prices all together in this market. I have attached the article to read, but to summarize:

When I qualify a client on a 5 year insured term, I simply use the 5 year rate that they will be paying. After October 17th, I and all other lenders will have to use the bank posted rate of 4.64%. So as per the example below, you tell me what is going to happen to home prices and the number of your clients that can’t get into the homes you have been showing.

The new qualifying mortgage rate announced today means people will not qualify for as large a mortgage as before. Under the current qualifying rule, someone earning a combined $60,000 with 0 per month in non-mortgage loan payments would easily qualify for a $350,000 home with a 5 per cent down payment. Under the new rule they will not qualify for the same home, that value drops to $270,000. The new rule goes into effect Oct 17th (and probably unofficially a few days sooner.) If you were planning on buying a home you’ve got two weeks at the most before you are impacted by the tougher qualifying rule.

http://www.cbc.ca/news/business/ottawa-housing-tax-real-estate-1.3788725

Duane Springsteel
Mortgage Broker
The Mortgage Group AB