Skip to main content

Mortgage Tips

New Mortgage Rules January 1, 2018

There are some substantial changes arriving on January 1, 2018. These new mortgage rules will make it more difficult for anyone looking to purchase or refinance their property with 20% or more down payment or equity.

FICOM is implementing a rule change that make it so when anyone in Canada looking for financing at 20% and above equity would need to qualify under a stress test of 2% above the rate they are receiving or the benchmark rate, whichever is higher.
What this effectively does is lower what a client may qualify for by about 20% – 30% depending on their income and debt levels.

a quaint a-frame house at dawn with the sun peeking through the trees over the driveway, in reference to a recent mortgage rules updateFor example if someone where to have the following scenario this is what would change come January 1, 2018.
Using the following:
3.34% 5 year fixed rate, 30 year amortization
$65,000 annual income
20% down payment
**Would qualify for approximately $510,000 purchase price under existing rules**

Come January 1, 2018:
2.99% 2 year fixed rate, 30 year amortization (Have to use 4.99% or 2% above contract rate, whichever is higher. So using a shorter term I will illustrate using the “Benchmark rate” for qualifying purposes.)
$65,000 annual income
20% down payment
**Would qualify for approximately $420,000 purchase price under new rules.**

Options to qualify at a higher amount would be getting a cosigner, having a suite in the property or coming up with a higher down payment. These were already options before but were not needed as much in these scenarios.

Please note that Credit Unions are not bound by these new rules yet but depending on how much business they take on they may decide to adopt the rules or raise their rates.

I hope this helps and feel free to contact us anytime with questions. As a mortgage broker, I have access to lenders across Canada and will work with you to find the best rate possible for your situation.

Matthew Jackson
Mortgage Professional

Related resources

Get Started

Let’s get your application off the ground.