How the new mortgage rules might affect you

If you are purchasing your first home and you have 10% saved up for your down payment, the new rules aren’t new for you.  Those rules changed in 2016.

If you are purchasing your next home with the idea that you will be paying more than 20% as a down payment then this might impact you.


If you’re among the 37 per cent of Canadians who are not aware of the change in mortgage rules and how they might affect them, read on. Here’s the condensed version of the new mortgage rules, how they may affect you, and how to forge ahead with purchase plans.

Last October, Canada’s federal financial regulator announced that all uninsured mortgage borrowers (those with a down payment of 20 per cent or more) must now qualify against the Bank of Canada’s five-year benchmark rate (currently 4.99 per cent), or at their contractual mortgage rate, plus two per cent. This, in an effort to ensure borrowers can service their mortgage debt when interest rates rise – which experts predict will happen this year.

The new mortgage rules follow a similar stress test that was applied to insured mortgages with less than 20-per-cent down payment, in October 2016.

The new mortgage qualification rules are expected to have the greatest impact on first-time homebuyers in Victoria, Greater Vancouver, Kelowna, North Bay, London-St. Thomas, Barrie, Hamilton-Burlington, Greater Toronto Area, Durham, Kingston, Ottawa, Halifax and St. John’s.

According to a recent survey conducted by Leger on behalf of RE/MAX, of the 58 per cent of Canadians who are aware of the new  OFSI  stress test regulations:
  • 27% believe they will not be impacted by the changes
  • 18% believe they will be impacted by the changes
  • 13% are unsure of how they will be impacted by the changes

The mortgage rules may not affect you if:

  • you qualify at the higher rate – as of now, 6.99 per cent;
  • you were pre-approved for a mortgage before on or before December 31, 2017;
  • your mortgage refinancing agreement was arranged on or before December 31, 2017;
  • you signed a purchase agreement on or before December 31, 2017.

Mortgage Professionals Canada reported that 18 per cent of homebuyers, or approximately 100,000 people, will not qualify for a mortgage on their preferred home under new rules. Between 50 and 60 per cent of them will be able to adjust their expectations – and budget.

Tips to build a budget – stick to it

  1. Maintain a financial buffer of at least three to six months, to soften the blow of interest rate increases and unexpected bumps in the road.
  2. The mortgage you qualify for and what you can actually afford are two very different things. Look at your lifestyle, now and in the future, and consider how your mortgage payments and ongoing home costs will impact you. When buying a home, you might have to make some compromises on lifestyle in the interest of homeownership.
  3. Buying a home involves more than just mortgage payments. Ongoing expenses include maintenance, home insurance, property taxes, and utilities.

I think that if you are the typical Canadian values home buyer that doesn’t want to be house poor, these rules won’t impact you.

I would be happy to sit down with you and discuss your specific situation and how we can find you the perfect home in the era defined by these new rules.

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