On January 1, 2018, new rules will come into effect for how Canadian home buyers will qualify for mortgage loans. This means that qualifying for a new mortgage will become more difficult for many borrowers. Please continue reading for more information from Primaria Mortgages on the specifics of the new changes and the impacts you can expect.

OFSI’s New Stress Test – What’s the Impact?

Contributed by Cara Savege

What are the changes coming into effect on January 1st, 2018?

  • Non-insured mortgage consumers (buyers with a minimum of 20% down payment) must now qualify using a new minimum qualifying rate
  • The new minimum qualifying rate will be the greater of the five-year benchmark rate published by the Bank of Canada OR the contract rate + 2.00%
  • This applies to all terms, fixed and variable rates
  • This stress test does not have an amortization component, it is at the lender’s discretion to set the qualifying amortization
  • This stress test only pertains to residential mortgages
  • This stress test applies to federally-regulated lenders. Currently, provincially-regulated credit unions are not obligated to implement this change

How does this affect the mortgage consumer with a down payment of 20% or more?

  • The biggest impact will be the amount in which the home buyer can qualify for
  • This new stress test will reduce the amount consumers qualify for by approx. 20%

What happens to current pre-approvals dated before January 1st, 2018?

  • Pre-approvals that do not convert into a firm contract before January 1st will not stand. The pre-approval will need to be updated using the new qualifying stress test.

Do I still have the option to refinance my home?

  • Yes, homebuyers will still have the ability to refinance up to 80% of the value of their property. Consumers will have to pass this same stress test.

If my contract was written prior to January 1st, 2018, will I qualify using the old or new rules?

  • This depends on the lender. Likely consumers will be grandfathered under the old rules (no stress test) if the firm real estate contract is signed and dated prior to January 1st, 2018.
  • Information regarding how this rule will apply to pre-sale condos is still being determined. Likely lenders will have some discretion.

Cara Savege – Mortgage Broker