So what does this mean?
It will have an impact not only on high-ratio mortgages (where the borrower has less than a 20% down payment) but also to low-ratio (borrowers who have 20%). Borrowers will be impacted on the size of mortgage (and purchase price) of home purchases. Many of the current high Ratio policies (down payment < 20%) will now apply to borrower’s with 20% down payment in some cases with some lenders. this includes max 25 year amortizations, and maximum purchase price of $1 Million.
Here are some highlights:
Effective Oct 17thfor high ratio mortgages - purchasing with < 20% down payment, borrowers must qualify at the Bank of Canada posted rate (4.64%) on ALL terms, currently this applies to variable terms or terms less than 5 years.
On a 5 year fixed, borrower’s could qualify at the lender’s rate, ie 2.49%, but will now have to qualify at the BOC rate Effective November 30thfor low ratio mortgages “conventional” mortgages – a down payment of 20% - where the lender back end insures the mortgage or for another reason the borrower requires insurance on the mortgage·
A maximum amortization length of 25 years;·
A maximum property purchase price below $1,000,000 at the time the loan is approved;·
For variable-rate loans that allow fluctuations in the amortization period, loan payments that are recalculated at least once every five years to conform to the original amortization schedule;·
A minimum credit score of 600 at the time the loan is approved;·
A maximum Gross Debt Service ratio of 39 per cent and a maximum Total Debt Service ratio of 44 per cent at the time the loan is approved, calculated by applying the greater of the mortgage contract rate or the Bank of Canada conventional five-year fixed posted rate
A property that will be owner-occupied.