For the second time this year, new guidelines are being introduced that will impact how Canadians get approved for a mortgage… and for the second time this year, a lot of people are confused by what these changes mean! I’ve put together a short video to better explain who IS and ISN’T affected by it, and what it all means.

10 Ways The New Changes May Impact You

1. The new guidelines would introduce “STRESS TESTS” for all purchasers taking out a mortgage with MORE than 20% of a downpayment.
2. If you’re putting LESS than 20% down, taking a VARIABLE mortgage, or a term of less than 5 years – you’re already subject to qualifying under a stress test. No change to this segment of the market.
3. If you’re putting down MORE than 20% – you too will also be subject to the test.
4. The guidelines will require purchasers with more than 20% down to qualify at the Bank of Canada Rate OR the Contract Rate + 2% (which ever is higher)
5. For Example: Say the banks are offering you a 3% fixed rate for 5 years.  In order to be approved for it, you must actually qualify at 5% (3%+2%).  
6. Because purchasers are qualifying at a higher rate, many will see their max budget amount reduced by roughly 15-20%
7. The new guideline ONLY apply to those lenders that are deemed a Federally Regulated Financial Institution (currently 85 in Canada).
8. Those that don’t fall under Federal Regulations are not subject to the new guidelines.  The most popular alternative is CREDIT UNIONS like Duca or Meridian… although there is some discussion that they may adopt similar measures to the B-20 Guidelines. 
9. Although many will see their MAX budget reduced – it’s important to remember that NOT EVERYONE wants to spend the max a lender can make available for them.  I know of many clients who chooser to only spend 60, 70 or even 80% of their max budget on a purchase.
10. Like all changes in the market, there will be an adjustment period of probably 4-6 months for people to adjust to the changes.

More Reading:

Final Revised Guideline B-20: Residential Mortgage Underwriting Practices and Procedures

Canada’s banking watchdog sets tougher rules for mortgage lending

New mortgage stress test to hit ‘move-up’ home buyers