Starting January 1, 2018, it’s going to get tougher to qualify for a mortgage. The Canadian banking regulator has a new rule: After January, ALL NEW MORTGAGES will have to undergo a financial ‘stress test.’ Read on to find out what’s coming, and how if you buy now, you can avoid the mortgage stress test.
Who Do the New Rules Affect?
All home buyers!
Since 2016, only buyers with less than a 20% down payment and an insured mortgage underwent a financial stress test. This means they had to qualify at a higher interest rate to see if they could make payments if interest rates were to rise. Starting January 1, 2018, even those with larger down payments must qualify at a higher-than-posted interest rate. The new rules mean EVERYONE has to pass the stress test
- Buyers with uninsured mortgages
- Buyers with down payments of more than 20%
“The Office of the Superintendent of Financial Institutions (OSFI)…wants to see stress tests for those borrowers similar to what is already happening in the insured market.”
— Kelly Putter, Yahoo Finance Canada.
When Do the New Rules Apply?
New rules start January 1, 2018
How Will the New Rules Affect Me?
When applying for a new mortgage at a federally regulated institution (ie a bank), there will be a new minimum qualifying rate equal to the Bank of Canada’s posted five-year benchmark rate, or a bank’s contract rate plus 2%.
To view current Bank of Canada conventional 5-year mortgage rates, click here.
What Steps Should I Take to Avoid the Stress Test?
If you want to avoid the stress test, settle your mortgage now. Buy a move-in ready home in Allard, and talk with your builder about ensuring your contract and mortgage are finalized before January 1, 2018.
- Visit showhomes in Allard.
- Fall in love with Allard.
- Choose your favourite builder.
- Ask for a move-in ready home you can own before January.
- Do your homework and use this mortgage calculator to get an idea of what you qualify for under the new rules.
- Then head to a bank or broker.
- Make sure to complete all contracts and paperwork before January.
What Happens If I Get a Mortgage After January 1, 2018?
You’ll need to qualify at the Bank of Canada rate or the bank rate plus 2%. Essentially, you have less borrowing power after January 1st.