Mortgage Rule Changes Coming January 1st 2018

November 16, 2017 | Posted by: Allison Kurys & Kim Owen


The Government of Canada recenetly announced their plan to implement further mortgage rule changes, which will significantly affect the mortgage & real estate industries.  The following will explain the impact these new rules will have on those people looking to obtain mortgage financing after January 1st 2018.    

New Rules

Today, only High Ratio mortgages (all mortgages, regardless of the amount of mortgage type or lender.  

Current Stress Test: based on the five-year Bank of Canada Benchmark Rate of 4.99% (this is the same for all lenders and set by the government).

New Stress Test: will be based on the greater of the actual rate plus 2 or the five-year Benchmark Rate.

EXAMPLE: Currently, if you have 80% or less equity in your home (>20% down payment), options are still available in which you may be qualified at the actual contract rate (e.g., 3.14%-3.44% 5yr fixed). Clients who apply after January 1st will then have to qualify under the new Stress Test rules (e.g., Stress Test will be 5.14%-5.44%, if rates remain at 3.14%-3.44% 5yr fixed, as this is greater than the Benchmark Rate of 4.99%).

How Does This Impact You?

  • CONVENTIONAL MORTGAGE EXAMPLE: If you currently qualify for a maximum mortgage amount of $400,000 at 3.29% amortized over 25 years (with a lender that is not currently required to apply the Stress Test), as of January 1st the Stress Test will be mandatory (3.29% + 2 = 5.29%) and you would only be eligible for a maximum mortgage amount of $326,000 mortgage, an 18.5% decrease in eligibility.
  • HIGH RATIO MORTGAGE EXAMPLE: If High Ratio mortgage rates increase above 2.99% after January 1st, you could be in a position where you qualify for less than you would have been approved under the previous rules. If you currently qualify for a maximum mortgage amount of $400,000 at 3.09% amortized over 25 years, as of January 1st you would only be eligible for a maximum mortgage amount of $392,000, a 2% decrease in eligibility.

If you wish to discuss how these changes may affect you, as well as your BUYING, TRANSFER or REFINANCING options, please contact us today:

Kim at 613-878-2732 or Allison at 613-558-2923


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