Mortgage 101: Why you should start saving for your mortgage now.

Last month, the Government of Canada announced new legislation that has tightened mortgage requirements, impacting how much YOU may be able to borrow.

Under the new policy, all insured mortgage borrowers must be tested against their ability to pay their mortgage if actual rates were as high as the big bank’s five-year posted mortgage rates (currently 4.64%). If you are planning to make a down payment of less than 20%, you must insure your mortgage.

Under the old policy, a borrower with an annual income of $75,000 and 5% down payment could potentially qualify for a $370,000 home. Under the new rules, the same buyer could only qualify to buy a home for $300,000. That’s an affordability of nearly 20% less.

So, even if you’re not planning to buy your first home in the foreseeable future, it may be wise to start squirrelling away some funds for when that day finally comes. If this new policy has put a dent in your immediate plan to buy a home, talk to your mortgage broker about options for borrowing your down payment.

Either way, a trip to your mortgage broker can clear up any uncertainty you have and ensure that you get the best terms and rates available to you.

Wayne Martin

Wayne Martin is a mortgage agent and team leader of the Mortgage Alliance Martin Team in Sudbury. With 25 years experience in the industry, he's passionate about breaking down the jargon to help everyone understand their finances and get into their dream home! When he’s not in the office, which is rare, you can find him at his camp on the French River.

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