New housing price gap with variable rates versus fix year fixed rates

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The Minister of Finance rule changes for insured mortgages takes effect April 19, and there is a big house price gap for qualification if you plan on using a variable rate mortgage instead of a five year fixed rate mortgage.

Take for example you were told the maximum payment for a mortgage you could have to qualify for a mortgage was $2,348 per month.   That will cover you for a $500,000 home purchase with 5 percent down, using a 4.64% five year fixed rate amortized over 35 years.

April 19, the lenders are obligated to use the Bank of Canada website "posted five year mortgage rate".  With the recent increases that will most likely be 6.10%.

A 6.1% mortgage, amortized over 35 years with $2,348 monthly payments will cover a mortgage of about $410,500.  That's still needing default insurance.  Knock off the default insurance from the mortgage and you have spendable mortgage money equal to about $401,800.

Instead of $25,000 for a down payment, you might as well have $100,000 as a down payment.   Or, look for a cheaper home.