The most ground shaking mortgage rules to date will be affective on January 1st, 2018 for all federally regulated financial institutions in Canada. This includes both purchase and refinances!

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 will mean many families will be unable to retire high interest debt and remove capital from the equity in their homes.  This will force many people to either sell their homes, default on their mortgage or use VERY expensive private lenders.

 

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