Upcoming Government Mortgage Qualifying Changes 2021 & How that will impact you as a Home Buyer
Tuesday Apr 20th, 2021
John Greenlee from the Mortgage Centre joins me, Jennifer Foley, Real Estate Broker, to talk to us about upcoming government changes to qualifying to purchase a home / get a mortgage. Canada’s banking regulator signalled in early April 2021 to tighten qualification rules for uninsured mortgages, this is related to low interest rates possibly putting new home buyers too far into debt. This move will effectively reduce, by about 4 per cent, the size of mortgages households will be eligible to take. John gives us first hand an example of a buyer making $100,000 and how that change will impact the qualifying amount for a mortgage on a house they wish to purchase. Any questions about this, post in the comments below. Thanks for watching. www.jenniferfoley.ca #homebuying #homeselling #sellingtips #sellertips #jenniferfoley #themortgagecentre #remax #jenniferfoleyrealtor #johngreenlee
Speaker 1 (00:02):
Hey guys, Jennifer Foley here, your local realtor. It is Tuesday, April the 20th. I'm here today with John Greenlee from the mortgage center. John is a accredited mortgage professional mortgage broker. And, uh, he's going to give us some insight today on some of the upcoming changes that we're, uh, we're about to see, uh, in 2021 here with our, our local, um, governments making some changes to the qualifying. Is that right, John?
Speaker 2 (00:31):
Yeah, they're making some, uh, first of all, hi Jennifer. Thanks for having me. Um, yeah, they're making some changes, proposed changes. They haven't finalized them yet for June the first 2021. And, uh, it's, it's a pretty basic change today. The stress test is that a 4.79%. And what the government's doing is putting in a floor rate for the stress test. Um, they've suggested 5.25 will be where that starts and then they're going to review it annually in December of every year.
Speaker 1 (01:04):
Yeah. Okay. So let's talk a little bit about how that's going to affect buyers, right. And people wanting to make a move, put their home up for sale and look at buying something. So I'm going to let you take the, uh, you go ahead. You tell us all about that.
Speaker 2 (01:21):
Take the lead and go ahead. Sure. So, so first of all, if you have a pre-approval right now, definitely you might want to have another look at it because what you're pre-approved for today might be different, uh, based on this change. And, uh, we can show you tell us more about that. Yeah. And we can show you that here I've actually got, um, a couple of, I've got one example. If, uh, if you wanted to share the screen there, Jennifer, and I can show it. So I took some time before we came on here today to just give an example of how this could work. So this what you're seeing here on your screen, hopefully people can see this at home, uh, is an example of a household that makes a hundred thousand gross annual income. Uh, we used a little bit less than a 1% for property taxes, uh, in the calculation because house prices have appreciated and, uh, property taxes haven't kept up yet. And then of course, calculating for heat. And this example is based on the person having zero debt. Um, so you'll see here, our little app that we have has already calculated the maximum loan amount that this scenario would bring for this person is 527,000.
Speaker 1 (02:40):
So that'd be a mortgage then, or is that, um, the total purchase price?
Speaker 2 (02:44):
That would be the loan amount. So the mortgage. Okay. Okay.
Speaker 1 (02:50):
That's the bank of Canada rate plus 2%. So you're calculating that at 4.79.
Speaker 2 (02:56):
Yeah. So that's the way it is today is at four seven, nine. Okay. This other example that I'm going to show you here, I'm just going to click on it. Here should go over is based on the proposed change at 5.25.
Speaker 1 (03:12):
So that's just, that's not what the interest rate would be, but that is what the government may change, make that change too. So that if I came to you requesting a to know where I can buy at, then you're going to say, okay, well you have to qualify it this based on your income and, um, all of that, but that may not be the current mortgage rate that I may secure to actually finance that property. But that's what I have to qualify at.
Speaker 2 (03:39):
Right. It's just a qualifying rate. So, you know, like your rate could be, you know, variable rates today are down around one and a half percent. Yeah. You're, you're still gonna be able to get that same rate. Um, it's just you, you're going to qualify for less based on this change. Okay. So you can see there it's like a 20, how much was that? 20, a $26,000 change. Yeah. Just by the government changing that qualifying rate a little bit.
Speaker 1 (04:10):
No, you didn't. And that's a big amount. Doesn't seem like a lot to me.
Speaker 2 (04:15):
Yeah. In the grand scheme of things, $26,000 when we're talking hundreds of thousands of dollars, uh, may not seem like a lot, I think, uh, you know, for your first time home buyers coming into the market, it might be, um, a little bit more difficult for them depending, but it depends on your financial situation. Right. Um, obviously the more money you have down, uh, the more that's going to help, but, um, certainly people coming into the market are going to be affected by this, for sure.
Speaker 1 (04:46):
Okay. All right. So what would you, um, what would you suggest or give advice to somebody that may be looking at buying? Um, cause this proposed change is supposed to happen in June, June 1st.
Speaker 2 (05:02):
Yeah. The proposed change is supposed to happen June 1st and a little bit of background on previous changes. The government has made lenders tend to set a date before the government date. So the reason for that is the government has the date of June 1st. But if you submit, uh, an application to a lender, they have to be able to underwrite the deal before the deadline. So you'll probably see lenders doing things beforehand, but certainly anyone who's looking to buy right now, whether they're selling or buying should get pre-approved. Even if you've been pre-approved you're pre-approved last week, you want to get a pre-approval upgraded to include what it looked like with this new stress test. Just in case you don't find a place between now and then.
Speaker 1 (05:52):
So there could be a bit of a rush on the housing market. We may see that may. Oh, I think I lost you John. Oh, I think John's frozen. We'll go back here in a minute. I hope so. I don't know if anybody's got any, um, any questions then, uh, you can post them. We'll try to, uh, get your questions, get your questions answered. Oh, we lost John. All right. Well, if you guys have any questions, then we'll certainly try and get those answered and uh, yeah. Thanks for watching.
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