New Stress Test Guidelines for Insured Buyers
As of January 1st 2018, Canada’s Uninsured home buyers will be required to qualify for their mortgage with an interest rate of the greater of the Bank of Canada (BOC) Rate, or 2% higher then the contract rate.
Since Spring 2017 borrowers with less than 20% downpayment have already been subject to this rule, but as of January 1st 2018, almost all mortgage borrowers will need to meet the stress test requirements.
So what does this mean for your mortgage?
Buying a New Home?
If you are buying a new home with 20% downpayment or greater, the rules will mean that your buying power has been diminished.
Refinancing an Existing Mortgage?
The new rules will impact your intentions to refinance or borrow equity from your home as your borrowing power will be diminished.
Renewing Existing Mortgage?
If you don’t change lenders then you won’t have any issues, but that means accepting whatever rate the lender offers.
Switching Lenders?
If you are shopping for the best mortgage product and interest rate, and desire to switch lenders from your existing mortgage holder, you will be required to qualify based on the new stress test guidelines which diminishes your borrowing power.
Example 1.
Theodore Family
Annual Income; $100,000
Expenses; $750/mth
Property Tax; $4,500/yr
Amortization; 30yrs
Down Payment; $130,000
| Current Rules | New Rules (As of Jan 1st, 2018) |
|---|---|
| Maximum Mortgage Amount | Maximum Mortgage Amount |
| $520,000 | $420,000 |
| Maximum Purchase Amount | Maximum Purchase Amount |
| $650,000 | $550,000 |
Example 2.
Stephenson Family
Annual Income; $75,000
Expenses; $400/mth
Property Tax; $2,300/yr
Amortization; 30yrs
Down Payment; $102,000
| Current Rules | New Rules (As of Jan 1st, 2018) |
|---|---|
| Maximum Mortgage Amount | Maximum Mortgage Amount |
| $408,000 | $320,000 |
| Maximum Purchase Amount | Maximum Purchase Amount |
| $510,000 | $422,000 |
If you have any questions about what you can now qualify for, or what you can do with your existing mortgage, please feel free to contact me any time, I’m always happy to help.
Meghan Van Houten – Mortgage Agent
416-709-9062
meghan@mountainviewmortgage.ca
Mountainview Mortgages
5038 Fairview Street, Burlington, ON L7L 0B4
Independently owned and operated
Lic# 12568
