Mortgage Rule Changes… Again…
So, OFSI has yet again introduced new mortgage rules to furthermore “cool down the market”.
They have implemented the following:
1.) New stress test for 20% or greater down payments.
2.) Refinance rule uses
3.) Restrictions on secondary financing
1.) New Stress Test
For anyone putting less than 20% down, we are all familiar with the current stress test for insured mortgages. Most people to avoid the stress test and qualify for more either saved more money or got a gifted downpayment from the bank of Mom and Dad. This is no longer an option… For anyone with 20% or more, you have to qualify at your contract rate + 2%. Therefore eliminating the possibility to afford more if you manage to save up for a 20% downpayment.
Well, under these new rules the banks have more power over consumers… I know! right? Let me explain. If you have a current mortgage and it comes time to renew you will have to qualify under the new rules only if you move lenders or pull out equity. So, what does that mean? What if you don’t qualify? Well, now the bank knows you have no other options and therefore can use that against you by making you pay a higher rate.
3.) Secondary Financing Restrictions
Federally regulated banks are no longer allowed to use secondary financing to bypass loan to value limits. What does that mean? It basically will reduce your options to get creative and secure financing for that dream home you want. Secondary financing still allowed with private lenders… but that can be quite costly.
These rules will only curb hard-working, middle-class Canadians in their effort to afford homes. All these rules do is introduce new hoops for Canadians to jump through… They must be bored over there at OFSI.