Last week the government announced yet another set of rule changes that will impact the conventional mortgage market; those who have at least 20% equity/down payment on their property.  They have implemented what is called a “stress test”, effective January 1/18.

In order to qualify for a mortgage, the financial institution will have to add 2% to the rate and then determine if the qualifying ratios are in line.  The added 2% will significantly increase debt service ratios, which is not a good thing.  Currently mortgage clients are qualified at the contract rate.  So for example, if the contract rate today for a 5 year fixed is 3.5%, then that is also the qualifying rate.  Come January 1 if the contract rate is 3.5% the qualifying rate will be 5.5%.  Just a note, the effective rate will always be the contract rate.

This could seriously limit the purchasing power for a significant number of mortgage applicants and others may not be able to qualify for a mortgage at all.  If you or someone you know are considering buying a property or refinancing an existing mortgage, I highly recommend that you do not wait until January to get approved.

Please contact me today if you have questions/concerns about the changes.  I’d be happy to explain further.  DonnaL@dominionlending.ca or 905.336.3545