Mortgages for Presale Homes Purchased PRIOR to Jan. 1, 2018
Kelly Hudson • August 14, 2020
What You Need to Know about the New B20 Mortgage Rules!!
You then have months or even years to get your affairs and financing in order.
While you are waiting for your presale to complete:
- many buyers continue to save money while renting or living at home
- see increases with their wages
- if the economy is strong, build your equity when the property prices increase.
The main drawback is time, and perhaps new mortgage regulations.
When you sign your Presale agreement, the developer will have an estimated completion date… regrettably, that completion date can be pushed back numerous times.
Perhaps while you’re waiting for your new home to be built – new government mortgage rules are updated like B20.
In the fall of 2016, the federal government implemented a B20 rule, where only people with a 20% down payment would be able to qualify for their mortgage at a 5-year fixed rate. If you chose anything other than a 5-year fixed, you had to qualify using the Bank of Canada’s five-year benchmark rate.
Jan. 1, 2018 a new federal government mandated B20 stress test was implemented . This stress test removed the ability for anyone
to qualify at their 5-year interest rate (contract term) – regardless of down payment size.
B20 Stress test – The stress test means that financial institutions will vet your mortgage application by using a minimum qualifying rate equal to the Bank of Canada’s five-year benchmark rate (currently 5.14%) OR your mortgage interest rate plus 2% (which ever is higher).
What this means to you: with the new B20 stress test you now have 20% less affordability.
This could be a problem if you were on the edge of what you could afford when you bought your presale.
If you bought a presale and your completion date is in the next 3-4 months, contact me and we’ll work together to secure you a mortgage.
Many lenders we work with, grandfathered mortgage rules for presales contracts signed prior to Dec. 31, 2017.
- What this means: people who bought a presale with 20% down, can still qualify for a mortgage using the lenders 5-year fixed contract rate.
Presales are a way of life in Greater Vancouver & beyond!
Give me a call and let’s discuss a mortgage that works for you (not the bank)!
Kelly Hudson
MORTGAGE ARCHITECTS
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