Mortgage Changes Part 1 – Qualifying Rate
New rate to be used when qualifying for a mortgage. Could reduce how much you can be approved for.
Link: New mortgage rules for investment properties
Link: New mortgage rules for self employed individuals
By or before April 19, 2010, when qualifying for an insured (e.g. CMHC) mortgage and determining how much you can be approved to borrow, a different rate may be used for this process.
Here is a summary of the changes and impact:
- If you want to have a fixed rate with a term less than 5 years OR if you want a variable rate mortgage, you will need to qualify for the mortgage using the posted 5 year fixed rate. This rate could be 1.5%-2.5% greater than the rate you actually get for the product you want. This higher rate will reduce the maximum amount you can be approved for. If you can be approved for much more than you actually need you may not be affected.
- If you would like to have a fixed rate term equal to or greater than 5 years, you can qualify for the mortgage you want using the corresponding, discounted rate that you will ultimately receive for the product you choose. This is essentially how the process is now so no net change here.
- Therefore, if you want or need to be approved for the largest amount possible based on your situation, you will need to select a 5 year fixed rate closed mortgage (because this is the process that can use the lowest qualifying rate).
To confirm how much you can be approved for under the new rules and guidelines, contact me at any time.
(604) 603-2525 – maury@maurylum.com
