October 6th, 2016 By Stacey Robinson in Blog.
If you are thinking of buying a home and have less than 20% down payment, this is CRITICAL information for you to know! Effective October 17th, 2016, the Government of Canada is now requiring that any insured mortgage (less than 20% down payment) MUST qualify using the Bank of Canada Benchmark Rate, which is always higher than posted.
What does this really mean to you? Anyone that is currently pre-approved with less than 20% down, NO LONGER qualifies for the same purchase price after October 17th. After this date, they MUST qualify at the benchmark rate of 4.74% interest, vs. a 5 year fixed at 2.44% (or lower). Now what does that really look like? Let’s say your household income is $95,000 and you carry approx $1200/month in debt payment (2 car payments and a small credit card). If you have a purchase offer approved BEFORE Oct 17th, you would qualify for a $365,000 mortgage. However, if you wait UNTIL Oct 17th or later to send in an offer and get a full approval, your max purchase price would be $286,000 This is a difference of $76,000! That is a HUGE difference in home size, quality and area where you can purchase! It might mean having to get a townhouse instead of a single family home, or need to buy further from the GTA and possibly commute.
Stacey Robinson, Broker
Royal LePage Realty Plus