How the new mortgage rules will affect homebuyers in 2018

How the new mortgage rules will affect homebuyers in 2018

When it comes to mortgages, 2017 brought much ado about… a lot of things. The Office of the Superintendent of Financial Institutions (OSFI) has introduced new rules on mortgage lending to take effect in January 2018.

What these rules – introduced last October – mean is that even borrowers with a down payment of 20 per cent or more will now face a stress test, as has been the case since January of 2017, for applicants with smaller down payments who require mortgage insurance.

The stress test means that financial institutions will vet your mortgage application by using a minimum qualifying rate equal to the greater of the Bank of Canada’s five-year benchmark rate (currently 4.99 per cent) or their contractual rate plus two percentage points. If you’re going to be house-hunting next year, this may force you to settle for a less expensive home than you would be able to buy today.

However, if you are renewing your mortgage next year, lenders don’t have to apply the stress test you. This means that if you fail the stress test, you’ll probably get stuck renewing with your current financial institution, without being able to shop around for a better rate.

On the other hand, if you’re planning on refinancing your mortgage, you’ll have to qualify according to the higher stress-state rates rather than your existing contractual mortgage rate.