New rules in effect January 1st, 2018 will affect your purchasing power and your ability to refinance your home. If you are thinking about a move or a re-finance, it is important that you take action soon.
The government (Office of the Superintendent of Financial Institutions) is implementing new mortgage rules that will reduce purchasing power on conventional purchases and refinancing of all homes. The new qualifying rules will come into effect January 1, 2018 requiring all conventional mortgages to qualify at the greater of; a rate 2% higher than the contract rate, or the qualifying rate (currently 4.89%). The new rules will impact your mortgage affordability by approximately 20%.
Example: An average family income of $100,000 translates into approximately a $500,000.00 mortgage approval at current rates. With the new rules, the example family's ability to qualify for a mortgage will be reduced to approximately $400,000.00. For the purpose of this example, our mortgage calculations are based on a 30-year amortized mortgage and no other outstanding debts (OAC, rates subject to change).
What does that mean for you?
- If you are purchasing with 20% down payment or more, you must have a signed Agreement of Purchase and Sale prior to January 1st, 2018 AND a mortgage application or pre-approval in place or else your current purchasing power may be reduced by approximately 20%. To confirm: The Purchase agreement must be signed and dated prior to January 1, 2018 to qualify under the existing rules AND you must have applied for a mortgage or pre-approval before December 31, 2017.
- Are you planning on consolidating debt or withdrawing equity from your home in the near future? If an investment opportunity or consolidating debt is on your mind, you may wish to consider refinancing now, prior to the qualifying rules changing on January 1st, 2018, as it may not be an option in the New Year depending on your circumstances. If you plan on a refinance of any sort, after January 1, 2018 all the new rules will apply to your application.
- If your mortgage is up for renewal in 2018 and if you want to increase your mortgage it is a good idea to contact our office to see if we can get you approved for your upcoming renewal.
For further information on the announcement, please Click Here to read the Office of the Superintendent of Financial Institutions press release.
Everyone's goals are unique and to more fully understand the new rules and how they may apply to your specific real estate goals, reach out and we can discuss all your options before the new rules take effect.
And if you are simply curious what your home is worth, we are happy to prepare a quick report for you.