The High Ratio Rule
Any purchaser with less than a 20% down payment is required to obtain insurance to protect the lender. Any purchaser with less than a 20% down payment is required to obtain insurance to protect the lender. The insurers are CMHC, Genworth and Canada Guaruntee. Your mortgage broker arranges this for you and usually the insurance premiums are included in the mortgage amount. The bad news is that you have to pay an extra insurance premium. The good news is that this type of loan is considered less risky in the eyes of the lender usually being at a lower interest rate.
The 'Stress Test'
Now if you require this type of mortgage, you must qualify for your mortgage using the Bank of Canada qualifying rate (currently 4.64%). This is known in the industry as the 'stress test'. On our current products your actual mortgage rate will be in the range of 2-3% interest. The stress test is a way for the government to have you prove that you can afford your mortgage when are up for renewal down the road should rates increase. This is a way of ensuring that people can actually afford the homes they are purchasing. This financial 'stress test' was previously required for fixed and variable mortgages with terms of 1-4 years. Under the new rules it also applies to fixed-rate mortgages of 5 years or longer.
NEW Maximum Mortgage Qualification
How can we help?
The mortgage you get after these changes will not cost you any more money than it would have before. It will however effect how much money you qualify for, making a pre-approval even more important than it previously was to ALL buyers. Don't guess what you will be approved for, KNOW it. Contact us at firstname.lastname@example.org or call 289-645-1568 to start the pre-approval process today.