Effective October 17th, 2016:
Homebuyers seeking an insured mortgage, regardless of how much they have for a down payment, will be subject to a mortgage rate stress test beginning October 17th, 2016.
Before now, only those with less than a 20 per cent down payment were required to pass a stress test and have mortgage insurance backed by the federal government through the Canada Mortgage and Housing Corporation.(CMHC)
What does this mean for you?:
If you’re considering buying a home, and you require an insured loan, you must qualify for mortgage insurance at an interest rate greater than your contract mortgage rate or the Bank of Canada’s conventional five-year fixed posted rate (at this time, 4.66%*).
The new rules will apply to new mortgage insurance applications and approvals received after the effective date, or when the homeowner enters a contract of purchase and sale for the property against which the loan is secured after this date.
Before October 17th:
A household income of $120,000 and a downpayment of $80,000, the maximum purchase price you would be approved for is $588,213 at a rate of 2.340% and a 25 year amortization. As of October 17th, with the same household income and downpayment, you would only be approved for $499,370.
Applications received by October 17th must be funded by March 1, 2017 or your home must be completed by March 1, 2017 to be exempt from the new qualification rules.