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New mortgage rules – January 1st, 2018

New mortgage rules – January 1st, 2018

The most ground shaking mortgage rules to date will be affective on January 1st, 2018 for all federally regulated financial institutions in Canada.

OSFI is setting a new minimum qualifying rate, or “stress test,” for uninsured mortgages (mortgage consumers with down payments 20% or greater than their home price).

 

SCENARIO 1: Bank of Canada five-year benchmark qualifying rate

In this case, the family’s mortgage rate, plus 200 basis points, is less than the Bank of Canada five-year benchmark of 4.89%.

A family with an annual income of $100,000 with a 20% down payment at a five-year fixed mortgage rate of 2.83% amortized over 25 years can currently afford a home worth $726,939.

Under new rules, they need to qualify at 4.89%
They can now afford $570,970
A difference of $155,969 (less 21.45%)

SCENARIO 2: 200 basis points above contractual rate

In this case, the family’s mortgage rate, plus 200 basis points, is greater than the Bank of Canada five-year benchmark of 4.89%.

According to Ratehub.ca’s mortgage affordability calculator, a family with an annual income of $100,000 with a 20% down payment at a five-year fixed mortgage rate of 3.09% amortized over 25 years can currently afford a home worth $706,692.

Under new rules, they need to qualify at 5.09%
They can now afford $559,896
A difference of $146,796 (less 20.77%)

 

This mortgage landscape has become very confusing due to regulatory changes that have occurred over the past year or so.

I am very knowledgeable in mortgages and can help you choose the right option for you and your family.

For more information, please visit: www.dominionlendingniagara.ca

Thank you,

Cameron Wilson | Mortgage Agent