Date Posted: April 10, 2017
The qualifying rate, which is based on the most common posted rate of the big six banks for a five-year fixed rate mortgage, has been stuck at 4.64% since the government announced the new measures in October 2016. Homebuyers are finding that qualifying with that rate is a heavy burden and creating a huge gap when it comes time to deciding how much you will actually pay, considering consumers can lock in a rate much lower (ex: 2.59%) with today's rates.
With mortgage default insurance required for any homebuyers putting less than 20% down payment and the slight increase in the insurance premiums that have come into effect March 2017, homebuyers are having to re-think how much of a house they can afford.
With many homebuyers now purchasing a home that may be a little less expensive than what they had plan to purchase - What should they do with the extra income they had originally hoped to use to qualify for a more expensive home?
Canadian Mortgage and Housing Corp (CMHC) has just published a how-to guide book for buying a house with a clear message that suggests homebuyers should avoid borrowing as much money as possible from their financial institutions and instead should focus on prepaying their mortgage.