Jeremy Rudin, Superintendent of Financial Institutions (OSFI), which is the organization that governs our federal banks and policy, announced that they will finalize the new mortgage criteria later this month. Despite the amount of criticism they have received from their industry consultation with major banks and economists, they have no intention of backing off the new proposed rule changes.
The new rule changes will be similar to what they enforced 1 year ago to new home buyers being forced to go through a qualification “stress test” by being approved for a mortgage at a much higher rate than what they are actually paying. At this point, it only affects home buyers with less than 20% down payment.
The new proposed rule will now apply to all mortgage applicants, whether purchasing a home with 20% down or more or existing home owners trying to refinance or use equity from their home for other purposes. These applicants will now be forced to qualify at the actual interest rate PLUS 2%. Today’s average 5 year fixed rate is at 3.39% and now the amount you qualify for will be based on a rate of 5.39% yet only have to make payments based on the actual rates.
This is important information for anyone considering taking equity out of their home or wanting to secure a line of credit for future use.
On a few examples done in our office this week to see what the proposed effects will be, it’s reducing one families mortgage options by $100,000. They can refinance today under the existing rules and take $100,000 equity out for renovations and investments however if the new rules are passed, they will no longer be able to access that equity unless they sell their home.
IF YOU ARE CONSIDERING ACCESSING YOUR EQUITY, ACT NOW SO WE CAN GET YOUR APPLICATION IN AND HAVE AN APPROVAL HELD FOR YOU FOR THE NEXT 120 DAYS.
When we saw the last set of rule changes be implemented, the banks became extremely backlogged with turn around times causing many people to miss the opportunity.