Understanding How New Mortgage Regulations Will Change the Home Buying Process

New mortgage regulations are on the horizon. Many Canadians will face additional stress test applying for a mortgage from a federally regulated lender after January 1st, 2018.

Lenders will be required to vet all mortgage applicants, even if they can produce a down payment of 20 percent or more, this may present rates that are noticeably higher than their contractual mortgage rate.

The new mortgage regulations are meant to protect Canadians from taking on too much mortgage debt by lessening the amount people can borrow based on their current financial situation. New mortgage rules will make many homeowners question their home preferences, with many needing to decrease their budget to meet the upcoming mortgage regulations.

Canadians who are renewing their mortgage with their current lender may be exempt from the new regulations. That being said, some mortgage lenders may still decide to make their clients pass the financial stress test and enforce a stricter standard on their mortgage renewal.

An unusual trend may emerge with more Canadians turning to credit unions for mortgages in the upcoming new year. Credit unions are not required to follow national regulations; instead, they only need to adhere to localized provincial rules. Many Canadians with a more substantial down payment will have access to more funds through credit unions. Obtaining a mortgage from a credit union is already a good option for many Canadians, but it will become a lot more attractive for more people in January.

The difference in the amount federally regulated lenders can provide now when compared to 2018 are staggering. Many mortgage experts project that borrowers may have access to 15-to-20 percent less money on their mortgage. Mortgages financed through credit unions will remain at the same level next year, allowing people to bypass the required stress test. This potential trend presents an attractive option for homeowners thinking about renewing their mortgages in 2018.

Many mortgage advisors are warning Canadians that mortgage rules are never predictable and they can quickly change from one year to the next. It’s possible that credit unions may eventually adopt a stricter stress test into their application process. Some credit unions are already volunteering to take on the federal regulations on their own accord.

With current mortgage rates being so low, it’s tempting for many Canadians to overextend their budget in an effort to own their dream home. The new regulations are designed to encourage people to purchase homes they can afford, even if rates increase over the term of the mortgage.

Finding the perfect house for you and your family can be a challenging process. It is essential to find a home that suits your lifestyle and your budget. The new national regulations are meant to help homeowners and keep them protected regardless if there’s a rate increase during the mortgage term.

An experienced mortgage advisor will be able to walk you through the entire mortgage application process including the upcoming borrowing rules. They can also sit down with you and review your goals and design a financial plan that works both today and tomorrow. Learn more about the differences between traditional mortgage lenders and credit unions today by contacting one of our experienced mortgage advisors.

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