CHANGE 1: QUALIFYING RATE STRESS TEST TO ALL NON INSURED MORTGAGES
Non insured mortgage consumers (buyers with a 20% or greater down payment) must now qualify using a new minimum qualifying rate. The minimum rate will be the greater of the five-year benchmark rate published by the Bank of Canada OR the lender contractual mortgage rate +2.0%.
How does this affect the mortgage consumer with a down payment of 20% or more? The biggest impact will be on the amount in which the homebuyer will be able to qualify. Previously, the homebuyer qualified at the rate offered by the lender. Now, the homebuyer must qualify at the benchmark rate which is the higher of the Bank of Canada Rate (currently 4.89%) OR the rate from the lender plus 2%. This applies to all terms, fixed and variable rates.
Mortgage Amount $400,000
If Contract Rate is 3.44%
Monthly Payment $1,985.00
Minimum Income* $70,000
Benchmark Rate 5.44% (3.44% + 2%)
Monthly Payment $2,427.00
Minimum Income* $85,000
*The above is based on 35% GDS RATIO (Gross Debt Service Ratio) and a 25 year amortization.
STRESS TEST SUMMARY
UNINSURED MORTGAGES Homebuyers/owners qualify for a mortgage using the benchmark rate, which is the Bank of Canada rate (currently 4.89%) OR the lender rate +2%, whichever is greater.
INSURED MORTGAGES You must qualify for a mortgage at the Bank of Canada rate (currently 4.89%)
OSFI has implemented 3 new mortgage rule changes starting January 1, 2018