Canada’s banking regulator, the Office of the Superintendent of Financial Institutions (OSFI), recently released proposed new changes to the federally regulated mortgage guidelines. The potential changes could make it more difficult for people to qualify for the size of mortgage that they need.
According to Andre Deleo President and Principal Broker with Morgix, the proposed new rules are likely to be enacted. “When potential new rules are suggested, they normally become a reality,” he says.
Mortgage Size Restrictions
OSFI’s proposal includes restrictions pertaining to the size of mortgage compared to a borrower’s annual income.
“The new rules potentially cap someone from borrowing greater than 4.5 times their annual income. This, in addition to the stress test already in place, will definitely have an effect on a homeowner’s borrowing potential,” explains Andre. “For example, a first-time home buyer hopefully earning 100K per year will not be able to borrow more than $450,000 in the form of a mortgage.”
Options are Available
Luckily, the OSFI’s changes only affect federally-regulated lenders, so there are still options available. Licensed mortgage brokers like Andre and his team are able to work with a variety of lenders to find their clients the best possible terms.
“There are always other options, which is why consulting a licensed mortgage broker has now become more important than ever. Brokers will look to other alternative lenders, such as credit unions, to find ways to help you reach your financial goals,” he says.
Andre continues, “Mortgage brokers are always available to help. You should be provided with a free consultation to help you qualify for a mortgage that is right for you. We are also aware of different regional programs that provide forgivable loans for first time home buyers to help you increase your down payment towards your first home. Additionally, if we find that you aren't ready yet, we can help you set goals so you can get to the point you need to be at to get into your first home or your dream home. That should be every brokerage’s main goal every time someone contacts their office.”
There are a few things that potential borrowers should keep in mind in light of the OSFI’s proposed changes. Pre-approvals remain as important as ever, but some borrowers may need to reassess their expectations since the size of the mortgage they qualify for may shrink.
“If you are in a position to buy now, I would always recommend getting into the market sooner than later if it is feasible,” Andre suggests.
“I think the most important thing is to manage expectations. If your goal is to buy a home you should look at making sure you are pre-approved for a mortgage first, then consult a Realtor to find out what areas you will be best suited to get into at the price range you can afford. Do not start looking at any purchases without a talking to us first for pre-approval from a variety of lenders.”
If you have questions about the proposed mortgage changes or would like to schedule a consultation with Andre’s team, visit MORGIX License #13399 online, email them at [email protected], or call 1-844-466-7449.