Proposed Mortgage Changes

New proposed mortgage changes may affect how much a person can qualify for in the near future. Find out if the new proposed rules will affect you.

As you know, mortgage rules are constantly changing and evolving in the current economic environment. The decision to change lending rules is made by Canada’s banking regulator, OSFI (Office of the Superintendent of Financial Institutions.) They regulate Canada’s lending institutions. OSFI wants to ensure that borrowers who plan on buying a home at the very top of their budget no longer qualify for the higher mortgage amount.

The regulator is worried about banks being exposed to heightened risks from record indebtedness, potential recession and multi-decade highs in interest rates. “Encouraging lower mortgage balances reduces the probability of homeowners defaulting by making ongoing debt payments more manageable,” OSFI explained in an announcement last week.

Here are the three proposed changes OSFI is considering:

Loan-to-Income Limits: Placing an overall limit on mortgage size based on the borrower’s income.

Debt Ratio Limits: Using the current default insurance (mortgages with less than a 20% down payment) debt service guidelines for borrowers who do not require default insurance. This will reduce the buying power for those with more than a 20% down payment, losing the current qualifying advantage.

Stress Test Tweaks: Change the current mortgage stress test to correspond more closely with a mortgage’s level of risk.

If some of these proposed changes are adopted this year, it will be more challenging to qualify for a mortgage. This will affect those who want to buy a new home or refinance an existing home. Let’s connect if you are worried that some of these rules will affect you. I’m here to help you make an informed decision.

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