Dear friends, I am writing to give you a heads up of the impact of changes coming to the mortgage industry. Are you considering refinancing your mortgage? Come January 1, 2018, that window of opportunity will be closed!! Let me explain the impact this will have on you, your family and friends.
The most impactful change is to the refinance market. Let’s say you want to consolidate your mortgage and other debts into 1 mortgage, take equity out of your home for investment, home renovations or purchase another property. Currently, you would qualify on the rate you receive but with the new legislation, you will have to pass the stress test and you will have to qualify at the benchmark rate, which is currently 4.89% or 2% above the interest rate you receive, whichever is higher. (For example, if your 5 year rate is 3.09% + 2% = 5.09%). What does this mean? It means this will greatly reduce how much equity you can take out of your home.
Right now, if you were to purchase a home with a minimum of 20% down payment, your debt servicing would be calculated on the 5 year interest rate you receive. Come January 1, 2018, you will have to qualify in the same manner as above. This means that the family’s purchasing power will decrease substantially. Just to give you an idea, a purchase price of around $720,000 would be reduced to around $570,000 which is approximately $150,000 reduced buying power (these numbers are not exact due to variations in property taxes, condo fees, other debts, etc.)
If you think you may need to take equity out of your home for whatever purpose, do it now before the January 1st deadline. Please call me if I can be of any assistance to you, your family or friends!
Colleen Saunders is a 20 year veteran in the mortgage industry, serving Oakville, Mississauga, Burlington and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.
To contact Colleen, please fill out the form on www.mortgagesbycolleen.ca or call 416-459-2406