Jan 2018 Mortgage Changes

    January 1 2018 Mortgage Changes

    We have all been hearing a lot about the new mortgage rules starting in January 2018. Here is the low down on how this could affect you and your home purchase in 2018.

    What is happening is that now even if you have an uninsured mortgage, meaning you are putting at least 20% down, you will need to go through a “stress test”. You will need to now be approved at the benchmark rate, which is currently 4.89% or your contractual rate plus 2%. Whichever is more is what you will have to be approved at. This means you will be able to afford a house about 20% less than you could prior to the rule change.

    When renewing your mortgage if you change your lender you will also have to go through the stress test for the renewal. If you stay with the same lender it seems as though you will not have to go through it.

     

    The reasoning for these new rules is meant to ensure that Canadians don’t take on too much mortgage debt; the idea that if rates go up you would still be able to afford your mortgage payments.

    This may be avoided by using other lenders and credit unions since this is a federal change and credit unions are ran provincially. If credit unions are getting flooded with new mortgages they may become weary of riskier borrowers and decide to follow the new rules as well. A few have already opted to follow the new rules and eventually they may all but as for now it may become a great option for buyers in the New Year.

     

    Here are some examples of how this will change what you would be approved at with 20% down:

    Household Income

    Maximum Purchase Price Today Maximum Purchase Price Jan 1 2018
    $60,000 $409,626 $334,323
    $100,000 $682,710 $557,206
    $150,000 $1,024,065 $835,809
    $200,000 $1,365,420

    $1,114,411

     For illustration purposes only. Based on 25 yr amortization, 20% down purchase, 5 yr term, qualifying rate 3.29% today and 5.29% January 2018. Does not include property taxes, heat or condo fees. OAC.

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