KAMLOOPS — Mortgage brokers, homeowners and homebuyers beware: new mortgage rules went into effect January 1.
The rules mean that even borrowers with a down payment of 20 per cent or more will now face a stress test, the same test applicants with less than 20 per cent for a down payment have been paying since January 2017.
"The major impact we're going to have now is that the government has decided that people that are putting down 20 per cent, or have 20 per cent equity in their house, are now going to have to qualify at what they call the contract rate plus two per cent," says Brenda Colman, a mortage consultant with Invis in Kamloops. "So, if your five year rate is 3.09, you have to qualify at about 5.09."
Utlimately, she says that means people will qualify for less when they are trying to take out a mortgage.
"About 18 per cent less. So, it's going to have one of two things happen: we're either going to see some of the property prices go down, or it's going to get people into a negative equity situation. If prices go down, they're going to end up owing more than what their home is worth. And that's kind of scary."
Colman says single income folks could face the biggest impact.
"So, you could have someone that's making between $50,000 to $60,000 that are paying $1250 a month for rent but won't be able to qualify for a mortgage that much. Two income houses won't be affected as much because most brokers have been using those qualifying rules."
She disagrees with the changes, arguing they were implemented to help cool off the housing market in larger cities like Vancouver and Toronto.
So, what does Colman recommend people do?
"I think people are just going to have to buy within their means and lower their expectations on what they're able to get. But there's different programs available as well to help assist so it's best to talk to your mortgage consultant about that."
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