The Mortgage Rule Change

The New Stress Test…What’s It Mean?


The new Stress Test effective Jan 1, 2018. This time it is directed at conventional mortgages meaning more than 20% down payment/equity. Economists suggest this will impact about 20% of the market. This will impact both purchase and refinance business alike. On the Bright side, for those who already have mortgages, this new Stress Test won’t impact you simply choosing to renew. That said, if you are looking to make a move to another institution for one reason or another, you could be impacted.  

What is a ‘Stress Test’?

Anyone looking to purchase or refinance with more than 20% down payment/equity, qualifying at the contract rate (3.39% today on average) will no longer suffice. After Jan 1, 2018 you will be required to qualify at the greater of the Bank of Canada Benchmark Rate (4.89% today) or the contract rate plus 2% (5.39% today).
What does this mean to me?

Below is a chart depicting the difference between qualifying today at the contract rate vs. after January 1and having to qualify with the new Stress Test (average 5-year fixed term @3.39% plus 2% = 5.39%).

Family Income Purchase price today Purchase price after Jan. 1
$100,000 $793,000 $652,000
$80,000 $640,000 $520,000
$60,000 458,000 $374,000


What now?

Simply put, the window of opportunity is quickly closing. This new Stress Test will mean a good segment of the market will be impacted and it is not just those looking to purchase a new home, it will impact those looking to take out equity for any one of the following reasons:

  • debt consolidation (credit cards, line of credit)
  • buying a second/vacation home
  • buying a revenue property
  • financing a new business venture
  • improvements/renos to the home

If any of the above ring true for you, the time to act is now. This could mean the difference between qualifying or not.

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