EXPOSED! The Truth Behind How The New Mortgage Rules Will Affect You In 2018

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New mortgage rules have been introduced and will take effect next year! But what does this mean for you? In layman's terms government will be raising the minimum qualifying rate for uninsured mortgages. Therefore if you were thinking about buying next year, those putting down 20% of greater than their home price will be affected. This new qualifying rate is set to be the greater of the five year benchmark rate (presently 4.89%) or 200 basis points above the mortgage holder’s contractual rate.

“The main effect will be felt by first-time buyers. No matter how much money they put down as a down payment, they will have to pass the stress test.”

However, realistically this change will effect anyone buying a house; resulting in a 20% decrease in affordability. According to Ratehub.ca here are two scenarios that are likely to occur and what it will mean for your family’s bottom line:

Scenario 1: Bank of Canada 5-Year Benchmark Qualifying Rate

In this scenario the family’s mortgage rate plus 200 basis points is less than the current bench mark of 4.89%.

According to Ratehub.ca’s mortgage calculator, a family with an annual combined income of $100,000 with a 20% down payment at a five-year fixed rate of 2.83% amortized over 25 years can afford a house worth $726,939.

BUT … Under the new rule…
  • They need to qualify at 4.89%
  • Now they can only afford a house worth $570,970.
  • A difference of $155,969 (21.45% less)

Scenario 2: 200 Basis Points Above Contractual Rate

In this scenario a family’s mortgage rate plus 200 basis points is greater than the Bank of Canada five year benchmark.

According to Ratehub.ca’s mortgage calculator, a family with an annual combined income of $100,000 with a 20% down payment at a five-year fixed rate of 3.09% amortized over 25 years can afford a house worth $706,692.

BUT … Under the new rule…
  • They need to qualify at 5.09%
  • Now they can only afford a house worth $559,896.
  • A difference of $146,796 (20.77% less)



If at first you do not pass the stress test, you have 3 options: you can put more money down, simply don’t buy a house, or add a co-signer onto the loan. Fortunately if you are able to pass it, you will not be subject to it at the time of refinancing; unless you switch lenders.

So whether you are a first-time buyer or simply waiting for your income to go up, you may need to put off buying a house for the time being. Alternatively you may choose to rent, purchase a condo opposed to a pricey detached home; or find a co-signer to qualify for that loan you may need to buy your dream house.

While the new rules may complicate a few things it is important to make sure you understand what you qualify for under these new regulations. Seek a seasoned realtor like me for professional advice. “This shouldn’t be something that shocks your pathway through the home buying process”.  To see what is available in the marketplace visit OntarioPropertyShop.com.






Information Taken From: http://www.macleans.ca/economy/realestateeconomy/how-the-new-mortgage-rules-will-affect-homebuyers-in-2018/

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