More mortgage rule changes

On October 3, 2016, more rule changes were announced from the Department of Finance:

  • Bring consistency to mortgage insurance rules by standardizing eligibility criteria for high- and low-ratio insured mortgages, including a mortgage rate stress test;
    • The mortgage stress test is requiring all borrowers, that have less than 20% down payment, to be able to qualify using the Benchmark qualifying rate vs. the actual interest rate
    • By today’s standards, that means the difference between qualifying on a 5-year rate of 4.64% vs. a 5-year fixed of 2.39% today
    • Assume this scenario:
      • Purchase price of a condo is $300,000
      • 5% down payment ($15,000)
      • $500 in other debt payment obligations
      • $2500 annual property taxes
      • $300 monthly condo fees
      • $125 monthly heating
      • Current 5 year rate used to qualify over 25 year amortization (2.39%)
      • The interest rate you will pay does not change, but the way you need to qualify does –
        • Income required before: ~$65,000+
        • Income required after: ~$75,000+
  • Improve tax fairness by closing loopholes surrounding the capital gains tax exemption on the sale of a principal residence; and,
    • Aimed at Vancouver and Toronto markets mainly,┬áthis change is to make sure that the Capital Gains tax exemption on a primary residence is not abused by either residents or non-residents buying and selling a primary residence within the same year
  • Consult on how to better protect taxpayers by ensuring that the distribution of risk in the housing finance system is balanced.
    • Translation: there may be more changes yet to come!

Some good news – anyone who already has a mortgage, or who has already applied for mortgage insurance, is exempt from the new rules, which will formally kick in on October 17, 2016.

Conclusion: There could be a quick rush by some to get in and have an approval prior to the change date, as the crunch will be felt by many first-time buyers. Also, if you are looking to sell and qualify for a new mortgage, you may also be subject to these rules! Contact a Mortgage Broker to review your situation and guide you accordingly.


Mark Brennan
Mortgage Broker


Image courtesy of Stuart Miles at

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