I had a blog reader email me to ask if the new mortgage rules apply in a situation where he purchased a new home a year ago but won’t take possession until next year. His mortgage application is still in progress. Here’s what the government website says about exceptions:
The announced measure will apply to new mortgage insurance applications received on October 17, 2016 or later. This measure will not apply to mortgage loans where, before October 3, 2016: a mortgage insurance application was received; the lender made a legally binding commitment to make the loan; or the borrower entered into a legally binding agreement of purchase and sale for the property against which the loan is secured. Mortgage loans for which mortgage insurance applications are received after October 2, 2016 and before October 17, 2016 are also not affected by the rule change, provided that the mortgage is funded by March 1, 2017.
Looks like the government has broken the new measures down into three different time periods:
- Prior to October 3: The new rules don’t apply to you if your mortgage insurance application has already been received; if you already have a binding agreement to purchase in place, or if your lender has already committed to making the loan. (So, the person who asked about his new home would seem to be protected, although he should confirm this with his mortgage broker or his bank.)
- Between October 3 and October 16. The new rules don’t apply to new applications for mortgage insurance so long as the loan is funded by March 1, 2017 (it says “by” not “on or before” so that means the closing date has to be before March 17).
- From October 17 on. The new rules apply to all new mortgage insurance applications made after that date.
If you are in the processing of buying and want to avoid the more stringent “mortgage stress test”, it looks like the mortgage insurance application has to be received before October 17 and make the closing date has to be before March 1, 2017.
What about mortgages where insurance is not required? As per my previous post, whether your loan is insured or not depends on your lender, so be sure to check with your bank or mortgage broker to find out what measures apply to you.