The New Mortgage Rules are Coming,

How Will it Affect You?

How to Lose $155,000 in a Day

What’s Happening?

Canada’s banking regulator, the Office of the Superintendent of Financial Institutions (OFSI) introduced new guidelines in October of 2017 that will require a mortgage Stress Test to all homebuyers, even including those with larger down payments. Currently, the stress test only applied to mortgages with lower down payments and those with a term of less than five years.

The New Guidelines

Here’s how it works. Under the OSFI’s new rules, people would have to show they can afford their mortgage payments using a stress test at either the five-year average rate posted by the Bank of Canada 5 Year Benchmark Rate, or two percentage points higher than whatever deal you are able to negotiate — whichever measurement is higher.

TL;DR

The new rules will reduce the size of the mortgage you will be able to take on given a certain down payment and income.

Consider This…

Let’s say a family had the following

2.83%

Mortgage Rate

20%

Down Payment

5/25

Mortgage

$100,000

Annual Income

STRESS TEST RATE = 4.89%

Even though this family found a great mortgage rate, when the required 2% is added (4.83%), the rate is less than the BOC’s 5 Benchmark Rate of 4.89%.  The Stress Test rate will be the higher of the two.

The Difference in Mortgage Size

Scenario 1

Signed Dec. 31, 2017

$726,939

Scenario 2

Signed Jan. 1, 2018

$570,970

A Difference of $155,969 in One Day!