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Major Changes to Canada’s Housing Mortgage Rules

percent sign - mortgagesIn an effort to keep Canadians from taking on a larger mortgage than they can afford the Liberal government has announced significant changes to the mortgage qualification rules. Finance Minister Bill Morneau also noted these changes should help stem some of the concerns about foreign buyers buying and flipping houses such that they drive up housing costs for Canadians.

Beginning on October 17, 2017, the stress test used to approve high-ratio mortgages will be applied to every new insured mortgage, including buyers who have more than 20% down payment. This change assures lenders that the borrower will still be able to afford the mortgage payments even if the interest rate increases

Another aspect of the change requires that the home buyer will be spending no more than 39% of their income on house-related costs like the mortgage payments, heat, and taxes. The TDS ratio must not be more than 44%.

The home borrower would not only have to qualify at the lenders’ interest rate but also at the Bank of Canada’s five-year fixed posted mortgage rate, which is an average of the posted rates of the big six banks in Canada.

These changes affect a broad range of mortgage consumers assuring safety for both the borrowers and lenders in the midst of the current low-interest rate market.

Further changes are outlined in the Globe and Mail article here