Having Trouble Securing a Loan
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Having Trouble Securing a Loan for Your First Home?
Even if you have 15 to 20% of the property value for down payment, it may not be enough to quality for a loan, under the new rules, from a traditional lender such as a bank. As of January 1, 2018, new regulations will be in place which will make it harder for first time homebuyers to secure the loan they need.
If you are in one of the situations below, we can provide alternate solutions to help get you the home you want.
- You do not meet the regular bank-lending criteria and need to work with an alternate lender
- You are now required to qualify at an above-contract level
- You have 20% down payment or want to refinance your home
What are the New Rules and What’s the Impact?
Higher Qualifying Rate for Uninsured Mortgages
The rate will be the greater of the five-year benchmark rate published by the Bank of Canada OR the lender contractual mortgage rate +2.0%. For example:
- 20% down payment
- 5-year fixed mortgage rates of 2.84%
- 25-year amortization
A family with an annual income of $100,000 can afford a home worth $693,405.
- Applying the new “stress-test”, the family must qualify for the mortgage using the greater of 4.89% and 4.84% (calculated as 2% + 2.84%).
- Therefore, with 20% down payment, a 5-year fixed rate of 4.89%, and 25 year amortization, the family can now afford a home worth $591,537.
The difference is that under the new rules, the family’s affordability has dropped by $101,868 (-15%). A bank that was willing to lend them $700,000 before is now only able to loan them approximately $600,000.
Have 15 to 20% down payment but finding it hard to qualify with the new rules?
We can help, contact us today!