support [at] | P: 416.707.1020

A an announcement was made yesterday about new Canadian mortgage rules that will come into effect Jan 1, 2018. I have been so busy posting and responding to comments on Facebook and by email, that I thought it would be a good idea to post this on my website!

What do these new mortgage rules mean? Folks will qualify for a lower mortgage amount if they apply after January 1 than if they do before December 31, because they will all be stress-tested now… which means, if the interest rate they qualify for is 3.24%, the borrower will be tested at a rate of 5.24% (a +2% increase) to see if they can still qualify for the amount requested. Obviously, folks can borrow less if the rate is 5.24% vs. 3.24%. This will affect new purchases and refinances alike, whether high ratio or conventional (i.e. 20% or more down payment).

From the article: “In practical terms, the stress test would mean that a potential buyer of a $1 million home with 20 per cent down would see their purchasing power knocked down by about 15 per cent.”

I will be confirming for my clients if they have to close before Jan 1, 2018 to skirt these rules, though it looks like they may just need to have a mortgage commitment in place and signed. This means they would have to put an offer on a property and get the mortgage approved and contract provided by a lender, and signed off on it, before December 31. I would emphasize that, despite these rules, lots of people at the lenders etc. go on vacation after the second week of December, so this means it’s best to have a mortgage approved in early December.

Alternately, after January this might further soften prices, so they may get a better deal, since this news will drive many to rush and buy a house before the end of the year, driving up demand.

If folks prefer buying sooner rather than later in light of this news and you want to work with me or refer clients to me, it’s best I get their documentation in place as early as possible, so they are not scrambling for it when they are house shopping.

I ran some scenarios based on this new ruling.

Example: Couple earning $100K gross income/yr and no other debt
20% or more downpayment, property taxes of $3000/yr
3.39% interest rate for 5 year fixed:

25 Year Amortization:
Today: max $570K mortgage
After Jan 1: max $465K mortgage –> a difference of $105K!

30 Year Amortization:
Today: max $640K mortgage
After Jan 1: max $507K mortgage –> a difference of $133K!


PS: Most Credit Unions are provincially-based so they are governed by provincial regulators, and not OFSI, which is national. For now, even though CUs are not subject to this regulation change, it’s likely they will institute similar parameters soon.

Check out this article for more information: