Important changes to mortgage rules for buyers buying with 20% or more down payment

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OSFI finalizes new mortgage rules, includes stress test for uninsured borrowers

Today, the Office of the Superintendent of Financial Institutions (OSFI) released revised guidelines for the mortgage industry.

These new parameters will take effect January 1, 2018.

OSFI said they will be holding information sessions through the fall to discuss implementation expectations. These new guidelines include a stress test for uninsured mortgages or mortgages with more than a 20% down payment or 20% in existing equity. This new stress test means that borrowers will be qualified at the greater of their contract rate + 2% or the five-year benchmark rate published by the Bank of Canada, which is currently 4.89%.

To give you some numbers, per $100,000 in mortgages. Based on an interest rate of 3.29% with a 25yr amortization.
Mortgage Payment – $ 488.25 (3.29% with 25yr am)
Benchmark Rate Payment – $ 575.36 (4.89% with 25yr am)
Stress Test Payment – $ 598.22 (5.29% with a 25yr am)

Lenders determine how much money you can borrow by determining what percentage of your income can go towards your mortgage and debt payments. The new requirement will determine the mortgage payment based on the higher of the benchmark rate or stress test rate, even though your contract rate is 3.29%.

This will reduce your maximum allowable mortgage by approximately 20%.

The guidelines go into effect January 1, 2018. We are watching them closely.

Information provided by Andre Houle from The Mortgage Group. 780-887-6847