New stress test regulations in place by January 1, 2018
It is no secret that Canada has some of the highest debt-ratios of all the G7 countries, so to combat this swing, The Office of the Superintendent of Financial Institutions (OSFI) has instituted changes ensuring that Canadians are better able to handle mortgage payments should we see a dramatic upswing in rates.
The new government mortgage stress test begins on January 1, 2018 (maybe earlier… beware). Simply put, the rules will effectively reduce the mortgage amount Canadians will be able to “qualify for” depending on their down payment and household income for new mortgages, refinances and renewals.
B-20 Guidelines will require the minimum qualifying rate for uninsured mortgages to be the greater of the five-year benchmark rate published by the Bank of Canada or the contractual mortgage rate +2%.
The Numbers Are In
If you currently have a mortgage of $400,000 at a rate of 3.44%, your monthly payment would be $1,985 and you would qualify with a minimum income of $70,000. Under the new regulations, that interest rate would jump to 5.44% with a monthly payment of $2,427 which means you’d need a minimum income of $85,000 to qualify for the same $400,000 mortgage moving forward.
If you are considering refinancing in order to consolidate debt, renovating your home, or for future investments, it is important you start your approval process before the new regulations come into effect. If you are approved before January 1, 2018, you are locked into that rate and approval for up to 4 months. Let’s Talk. HW
If you require more information please contact HW Advantage