Recent Mortgage Rule Changes In Ontario
Keeping up to date with the new mortgage rules in Ontario can be challenging, but thankfully our mortgage experts in The House Team share everything you need to know regarding your mortgage needs.
There had been speculation that the government would act to cool the hot housing market, however the industry saw only modest measures in the April 19th federal budget. A national annual tax on foreign-owned properties that are left vacant or under-occupied was announced, which will take effect in 2022. This will only apply to "non-residents" to discourage offshore buyers.
New Stress Test
The budget referenced the recent announcement by the Office of the Superintendent of Financial Institutions (OSFI), which is proposing a new stress test rate for uninsured mortgages of 5.25%, effective June 1st.
This is higher than the current 4.79% and, going forward, will no longer be based on bank posted rates. It will be set a minimum of once per year by OSFI.
What is the stress test?
When getting a new mortgage, lenders must ensure that you pass a stress test, which means that you can handle payments at a certain qualifying rate. This is not the same rate as your actual contract rate, it's for mortgage qualifying only.
Why June 1st Matters
Uninsured mortgages (i.e. when you have more than 20% equity) approved before June 1st are not subject to this tougher stress test, so qualifying will be slightly easier.
This applies to purchases that close after June 1st with a signed purchase and sale agreement. As a result, if you are thinking of refinancing in order to get a lower rate, for debt consolidation or a purchase with more than 20% down, it's a good idea to get in touch with our mortgage team so we can discuss your situation in depth.
What about high-ratio mortgages (i.e. less than 20% down)?
This stress test has not changed but it is certainly possible that it may also become slightly tougher at some point. If you are looking to purchase, get a pre-approval so you are house shopping within your budget and have rate protection.
It's important to purchase when you are financially ready and not be driven by market conditions.
The House Team is here to help! If you have questions about your mortgage, whether existent or upcoming, please let me know!
Contact Our Office at (866) 559-5016!