At our mortgage office on the East Hamilton Mountain, we are receiving a lot of questions and concerns regarding the new mortgage rules that were announced on Monday. We would like to take this opportunity to simplify and clarify what the major changes are and how they might influence you:

Currently there is a “stress test” that checks if a borrower would qualify for a mortgage at the benchmark rate (currently at 4.64%). This stress test was applied to anyone seeking a variable rate mortgage or a mortgage with a term of less than 5 years. As of Oct. 17, this stress test will be applied to anyone making a downpayment of less than 20%. This stress test rate is usually higher than what buyers can negotiate.

Furthermore, as of Nov. 30, the government will impose new restrictions on when it will provide insurance for low-ratio mortgages. This means that previously some lenders were offering a 30 year amortization. As of Nov. 30th this will be reduced to 25 years. Again, that means that the criteria for qualifying for a mortgage are stricter since the payments on a 30 year amortization would be less than a 25 year.

There are other new rules but those are the main ones. If you would like to discuss these or other topics, please do not hesitate to contact Robert Floris.

Robert Floris is a mortgage agent serving the Hamilton East Mountain, Ontario and the rest of Canada. Robert offer the lowest available mortgage rates but also believes in educating his clients.