New mortgage rules were announced this week, one in particular will have an impact on many Ottawa home buyers.
For home buyers with less than 20% down payment, purchases after October 17th, 2016 will be subject to new "stress tests" which will impact your purchase affordability. This means your approval will be based on the bank's 5 year fixed, posted rate which is currently 4.64%. When you consider that you were being approved prior to October 17th at a 2.69% rate or less....this will have a dramatic effect on HOW MUCH home you can buy. Even if you can afford the higher because of the lower rate - the bank will only loan out based on the 4.64%. They want to make sure IF rates rise you are not over your head.
I have a chart below showing the difference in your purchasing power. Remember its only for those with less than 20% down.
If you purchase prior to October 17th, the new rules will not apply.