New Qualifying Rate effective june 1st, 2021
As announced by the Office of the Superintendent of Financial Institutions (OSFI) and the Department of Finance, a new minimum qualifying rate will be used for all mortgages, effective June 1, 2021. The revised calculation of the minimum qualifying rate for both insured and conventional mortgages will be the greater of the contract rate plus 2% or 5.25%. This new “Minimum Qualifying Rate” is subject to review and periodic adjustment as described on the OSFI website as:
“OSFI will review and communicate the qualifying rate at a minimum annually, every December, well in advance of the high-volume housing spring season. OSFI will make a decision based on data from its ongoing monitoring of FRFIs and analytical work on system-wide and sectoral developments. As well, OSFI will consult its federal financial regulatory partners, notably the Department of Finance Canada and the Bank of Canada.”
What does this mean?
After June 1st, you will qualify for less money than they would have before. The jump from 4.79% to 5.25% in qualifying rate results in approximately 4.5-5% less of borrowing power (mortgage money)
This new rule will affect ALL mortgages. Not just conventional (20% or more down payment) mortgages insured mortgage too (5% - 20%).
Unless you received firm approval and commitment from the bank prior to June 1st, Or if it is an insurance deal as long as you have an accepted offer prior to June 1st and a completion date no later then September 30th (for some lenders), you will need to be re-qualified under new qualifying rate (5.25%)
Feel free to reach out to us so we can let you know how much money you qualify for after June 1st.