Kim Fleury

Office: 403-399-5777 |

Exactly what you need to know about the new mortgage lending rules

Over the past few weeks since they announced the new mortgage rules I've noticed there has been a panic and even some confusion among buyers as to how this will impact them. I have written this article to help try and clear up any confusion you may have.may. If you still have questions after you have read it feel free to get in touch!


Exactly what you need to know about the new mortgage lending rules 

 

If you’re looking to buy or sell property in the near future, I’m willing to bet you’re already aware of the new mortgage rules coming our way in 2018. But, do you know exactly how it will impact your home affordability?  

 

Here is everything you need to know.  

 

Buyers putting down less than 20% 

Guess what? Nothing changes! All buyers with down payments of less than 20% have already been put through this stress test since October 2016. The test is designed to determine if you will still be able to afford to pay back your loan if interest rates go higher. You will be judged against the five-year standard rate – which is currently 4.89% - even though currently there are lenders that offer mortgages at less. 

 

 

Buyers putting down 20% or more 

If you are planning to put down 20% or more (and avoid those pesky mortgage insurance fees), you will still need to pass the stress test in 2018. For this test, your minimum qualifying rate will be the greater of the five-year standard rate (4.89%) or 200 basis points above the mortgage holder’s contractual mortgage rate. 

 

This change directly results in a20% decrease in what you will be able to afford. Let’s break this down with some examples, originally found in this article on Money Sense. All calculations have been done on Ratehub.ca’s mortgage affordability calculator.  

 

Example 1: Bank of Canada five-year benchmark qualifying rate 

If your mortgage rate, plus 200 basis points, is less than the Bank of Canada five-year benchmark of 4.89%.  

 

 

Now 

Annual income: $100,000 

Down payment: 20% 

Mortgage rate: 2.83%*  

Home affordability: $726,939 

New 2018 Rules 

Annual income:$100,000 

Down payment: 20% 

Must qualify for: 4.89% 

Home affordability: $570,970 

*5-year fixed rate, amortized over 25 years 

Difference: $155,969 (21.45%) 

 

 

 

Example 2: 200 basis points above contractual rate 

If your mortgage rate, plus 200 basis points, is greater than the Bank of Canada five-year benchmark of 4.89%. 

 

 

 

Now 

Annual income: $100,000 

Down payment: 20% 

Mortgage rate: 3.09%*  

Home affordability: $706, 692 

New 2018 Rules 

Annual income: $100,000 

Down payment: 20% 

Must qualify for: 5.09% 

Home affordability: $559,896 

*5-year fixed rate, amortized over 25 years 

Difference: $146,796 (20.77%) 

 

 

This change will mostly be felt my first time home buyers, because no matter how much you save to put down, you will need to pass the stress test. 

 

What do you think? Will you be buying before 2018? 

 

With over 20 years in real estate investing and 12 years as a Licensed Realtor, Kim Fleury has the passion and experience to help you find your next home in Calgary or any of the outlying communities. Contact her at kimfleuryandassociates@gmail.com or call/text 403-399-5777.

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