New mortgage rules starting January 1, 2018
The Office of the Superintendent of Financial Institutions (OFSI) has introduced the new stress test rule that goes into effect January 1, 2018. The stress test rule will now require new uninsured mortgages (20% down payment or higher) to qualify at the greater of the 5-year benchmark Bank of Canada rate or the contracted mortgage rate +2%. The current 5-year benchmark rate is 4.99% meaning that all new unisured mortgages will have to qualify at this rate or higher.
If you currently qualify for a $300,000 mortgage with a 20% down payment at 3.09% for 5 years, with the new rules you would qualify for approximately a $237,000 mortgage with the same rate and term.
What this means for you:
If you are looking to arrange a new mortgage with 20% down payment or refinance your existing mortgage at a maximum of 80% loan to value, you have until January 1, 2018 to qualify at the contract rate, not the new benchmark rate. If you are thinking of taking advantage of your existing equity or refinancing for renovations on your home, the time is now. Any new mortgages after January 1, 2018 will be subject to the new stress test rules. If you have an existing mortgage and are renewing it with the same company you will not be subject to these rules.