A number of new home borrowers flew into action last week in order to beat the very tihgt anticipated timeline for the new federal rules coming into effect on Monday, October 17, 2016. For first-time homebuyers, these new rules will reduce their financial ability to buy a home.
In fact, there has been such an increase in first-time home buying that national loan origination software, used by Mortgage brokers to submit mortgages, was down for some time. Many mortgage brokerage firms, including AKAL Mortgages (servicing Mississauga and Brampton), stated they were 100% busier this week when compared to a normal work week.
Stress Test for All Canadian Mortgage Applications
Starting today all Canadian mortgage applications that are insured will be required to undergo a stress test. The purpose of the new stress test is to make sure that each borrower can pay their loan, even when there are changes in their financial situation or when interest rates go up.
The Issue for First-Time Homebuyers
The change was introduced by the federal government in hopes of stabilizing Canada’s housing markets and lessen concerns for home borrowers, in cities where prices have risen. However, in markets that are more balanced and the financial ability to buy a home is lower, first-time buyers will have to buy less expensive homes. This creates a new problem because in many cities less expensive homes may not be available to potential buyers making it extremely difficult to buy in today’s market.
The truth is that high ratio homebuyers, with less than a 20% down payment will feel the most impact from the first set of changes. Who knows about the impact of the other upcoming rules changes that will follow.
If you were one of the many homebuyers who flew into action, you already have an offer in place and your financing approved, then you don’t have to worry. This change will not have any affect on your purchase. Without both the two things mentioned above you will be subject to the new rule change.
Take Action
Now more than ever homebuyers should be getting in touch with their local mortgage professionals to seek buying advice post-change.
If you have any questions or you’re also concerned about the changes that are yet to come, it would be a great idea to discuss your options with an experienced mortgage broker at AKAL Mortgages.
When we say YES! We stand behind our promise.