07 Feb QUICK REFERENCE GUIDE: Mortgage Changes 2018
New Rule Changes- January 1st, 2018
- On January 1st, 2018, OSFI implemented new conventional (uninsured) mortgage rules, attempting to protect homebuyers from mortgage default in a rising interest rate
- The government introduced a rate cushion which will affect all uninsured mortgages (those with a down payment of 20% and all refinances).
They must now qualify at the greater of:
The Bank of Canada posted rate (5.14%)
Their contract rate + 2% (This means, if your rate is 3.39%, you would be qualifying at 39%)
*This results in approximately a 20% decrease in purchasing power
Example: A couple (or an individual) who has a combined income of $150,000
Maximum Purchase Price:
>Before the Stress Test: $1,050,000
>After the Stress Test: $840,000
Difference of: $210,000
Bank of Canada Rate Increase
- On January 17th, 2018, the Bank of Canada increased its overnight lending rate to 1.25% from 1%.
- The major 6 banks have followed their lead, and increased their prime rate. Each lender decides what their prime rate will (For example, Scotiabank’s is 3.45% but TD Bank is 3.60%)
- Changes in Prime influence variable interest rates and lines of
- Properties under 1 Million, with less than 20% down payment
- Insured by one of three insurers in Canada
- Minimum down payment is 5% on the first $500,000 and 10% on the difference up to $999,999
- Borrower has to be qualified at the Bank of Canada posted rate (5.14%) even if their contract rate is lower
For a quick and up-to-date mortgage calculator, please visit this link on my website.
Compliments of The Hanley Mortgage Group