As I have previously mentioned, the new OSFI (Office of the Superintendent
of Financial Institutions Canada) changes took effect for most lenders on
November 1st. Here are a few examples of how the changes could
affect you:
·
Qualifying
rate is going to be used for all variable rate mortgages and terms less
than 5 years (previously, some lenders would use a lower rate such as the 3
year fixed rate to qualify conventional mortgages)
o Let’s
say you have an annual salary of $50,000 and you are going to get a variable
rate, conventional* mortgage. If they could have previously qualified you at a
3 year rate, you would have qualified for approximately $297,000. Now that they will be
using the qualifying rate, you will only qualify for approximately $228,000*
·
Heat component
will be set according to property size (previously most lenders would use
$75-$100 a month for heat regardless of the property size)
o Again,
we will use the annual salary of $50,000. If you are to use $75 a month for
heat, your maximum mortgage amount would be approximately $289,000 however if you use
$115, your maximum would be closer to $281,000
*here is an example of one lender’s
new calculations for heat: < 2,000 sq ft
= $1,020 annually, 2000 sq ft to 3,500 sq ft = $1,140 annually, >3,500 sq ft
= $1,380 annually
These new guidelines
may vary slightly per lender but it is very important to find out how and if
they will affect you. Even if you were pre-approved prior to the changes taking
effect, you will now have to abide by your lender’s new guidelines. The
advantage of using a broker is that we have access to various lenders, which
means we can place you with the lender who has the best qualifying criteria to
fit your needs.
*a conventional mortgage is
one that has more than 20% down payment
*using a 3 year term rate of
2.69% and a qualifying rate of 5.24%, 25 year amortization and $100 a month for
heat, 35% for GDS therefore clients will higher credit scores could potentially
qualify for more. This also does not take into account additional liabilities that
could increase the debt ratio
*all calculations are assumed to
be correct, however should not be relied upon for your mortgage without seeking
professional advice
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