New Mortgage Rules ~ Jan. 2018
Effective January 1st, 2018, the mortgage qualification for conventional loans (20% down payment & over) will be subject to stricter guidelines. Here is an example:
Here’s how the rules would play out for a family with $100,000 in annual income, according to numbers provided by Ratehub.ca, a mortgage rates and credit cards comparisons site.
Let’s consider a first scenario in which the family is offered a mortgage rate of 2.83 per cent, which is more than two percentage points below the current Bank of Canada five-year benchmark of 4.89 per cent.
If they were to apply for a mortgage today, with 20 per cent down payment, a five-year fixed mortgage, and a 25-year amortization period, they would be able to afford a home worth $726,939.
If they were to apply for a mortgage on or after Jan. 1, they would be able to afford only $570,970, with a 20 per cent down payment.
** GOOD NEWS though: If you purchased before January 1st, 2018 but you're closing after January 1st, you get to qualify under the previous lending rules.
New OFSI Qualifying Criteria effective January 1, 2018
The Qualifying Rate for all Conventional/ Uninsured Mortgages:
The Highest contract rate + 2%
The Bank of Canada benchmark rate
For all High Ratio Applications, qualification will remains unchanged, the greater of the Contract Rate of Bank of Canada Benchmark Rate
Existing Pipeline Deals:
Purchases approved prior to January 1, 2018 will be honoured based on the old rules provided there is no change in the property and/or borrowers
If there is a legally binding Purchase and Sale Agreement that is dated prior to January 1, 2018, regardless of closing date, the customer will qualify under the old lending rules
Refinances approved before January 1, 2018 must close within 120 days of the application date to qualify under the old rules.
Preapprovals: if they are not converted into property specific deal before January 1, 2018, they will no longer be valid (Rate is still held, formal pre-app would need to RE qualify)