It has come to my attention that a lot of people in the market right now who are shopping for a property purchase may be in for a rude awakening when it comes time to remove financing subjects.
For example, I met a couple at a recent open house who have a great rate from a lender that is good for 90 days and they are looking a properties in the $450,000 range based on figures provided by their mortgage specialist. When I asked if this figure was based on the old qualifying rate or the new rules which come in effect on the 19th? They weren't sure.
What realtors working with their clients and purchasers need to understand is that under the new guidelines, which many lenders are already using, the amount of money one can qualify for will be based on the Bank of Canada Contract rate, NOT the rate they will receive on their mortgage. For example, I have clients with a 3.89% rate hold, but when they make an offer to purchase and we submit the deal the lender will use the current 5.85% contract rate!
How does this effect their purchasing power?
On an income of $100,000 this couple could get a $430,000 mortgage at 3.89%, but with the 5.85% contract rate, this income will only allow a $355,000 mortgage. That's a $75,000 reduction in purchase price.
So if you or your clients have been given a price range to work with, I would strongly suggest you contact your mortgage specialist and get an update based on the coming changes.
Peter
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