Changes are coming down the line for veteran homeowners and potential ones alike, as the federal government rolled out new rules that may end up making it harder to buy, but will ensure that those who do will be secure.
"It's always been in place for CMHC buyers who have less than 20 percent down and had to insure their mortgage through CMHC. For quite some time now they've had this 'stress test', so what the Superintendent of Financial Institutions has done is brought that into place for buyers who have over 20 percent down," explained Rhonda Blanchette of Remax Blue Chip Realty.
This is to make sure that people can afford their mortgage should the interest rates ramp up, avoiding the housing situation south of the border, where interest rates skyrocketed and resulted in many foreclosures because quite a few people couldn't afford their home. It will apply to both new and refinancing mortgages.
"Whatever the bank rate is, normally when you have 20 percent or more down you would just secure a mortgage at the bank cess rate. But right now, the bank will want to do a test, and see if you can qualify at 200 basis points, or 2 percent, that works out higher than what the mortgage rate currently is. This is kind of a cushion in case mortgage rates rise, they want to make sure that you can afford it."
"What they would do is, if you qualified at 3 percent and that's what the current rate was, they would want to put in and make sure you qualify for 5 percent, just in case the rates go up during the term of your mortgage. Honestly, what that means to buyers is that, sometimes, they may not be able to buy quite as expensive of a home as they were wanting to. Their debt ratio may be a little high, and they may have to go down in the price of a home that they can afford, or they may have to put a bigger down payment down," Blanchette said.
That said, according to the government this will only affect 1 in every 6 prospective home buyers in the country.
"So it's not a huge issue right now, and like I said, any client that had less than 20 percent down, they were already doing this to qualify. It's not a big change. The nice thing is that the people with 20 percent down, if they can't qualify at the higher rate, maybe they could just put less of a down payment down, and then they would have to go through CMHC and get the insurance. It's still an option for them."
She also pointed out that mortgage rates are still at historic lows, and in the Estevan area they are also at the lowest in years. This makes it still a good time to buy, and the local market will not be largely affected by the changes. She noted that the idea may scare some, but she sees it as a positive.
"Honestly it's a good thing, because it's protecting the home buyer, just making sure that they can actually afford their home and if rates go up, they still can."