In June of 2017, OSFI began “taking consultations” from industry stakeholders on a set of proposals. Buried quietly within that set of proposals is the single largest change to affect mortgage lending in the last 15 years. OSFI is considering making even borrowers with more than 20% down also pass the same stress test.
What is effect?
Just like before, borrowers will, overnight, qualify for 20% less of a mortgage when the rules are implemented. OSFI has said that the proposal will be finalized in October with a likely roll out date of January 18th. If you or your client is on the fence about whether or not to buy, they may qualify for significantly less in 2018 than they do today and may not be able to buy that dream home they’ve been considering.
One critical note: getting a pre-approval does NOT protect you from the rule changes.
Once the new rules take effect, whether you had a pre-approval or not, you will be subject to the new rules. In the past, if client was formally approved before the rule changes, then they were grand-fathered in and could use the old rules even if their mortgage closes after the implementation date. However, to get a formal approval you need an accepted offer on the new home and all conditions satisfied. Again, a pre-approval is not sufficient.
If you or someone you know might be affected by these rules, or if you want to know if you’re going to be affected, call me any time with questions.”
Rowan Smith, MBI, AMP
Senior Mortgage Planner / Partner, DLC – City Wide Mortgage Service