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OSFI’s Mortgage Stress Test: What You Need to Know

Published on October 31, 2017 in Mortgage by Eva

Canada’s banking watchdog, OSFI (Office of the Superintendent of Financial Institutions Canada) announced that there will be a new minimum qualifying rate, or “stress test” for borrowers with a down payment of 20% or more effective January 1, 2018.

Buyers will need to prove that they can afford payments based on the greater of the Bank of Canada’s five year benchmark rate or their contract mortgage rate plus 2%.

For example, if you purchase a home for $500,000 with 20% down ($100,000), you would have to qualify for a $400,000 mortgage.

Today you would qualify at a 5 year rate of 3.39%. Assuming a 25 year amortization, payment is $1974/month.

In January, under the new rules, you would qualify at the greater of 4.99% (Bank of Canada benchmark) or 5.39% (your contract rate + 2%). Based on new rules, you would qualify at 5.39%. Assuming a 25 year amortization, payment is $2416/month, which is $442 higher.

Bottom line is, the higher the rate, the higher the payment, the less you qualify for.

If you are thinking of refinancing or purchasing in the near future, call me at (604) 854-0337 or send me an email to take advantage of the rules prior to January 1st.

It’s about to become tougher to qualify for a mortgage!

This presentation contains images that were used under a Creative Commons License. Click on the link to see the full list of images and attributions: https://app.contentsamurai.com/cc/98416

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Eva Poulson Mortgage Broker
BC & Alberta Mortgage Broker

Eva Poulson

When I'm not breaking the knuckles of different lenders for better mortgages for my clients - I'm kidding (or am I?) - you can usually find me visiting with friends or family, writing for this blog, or doing my best to keep from capsizing a dragon boat!

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