Anyone who has 20% or more equity in their home or planning to use more than 20% down payment on a home purchase after January 1, 2018, may qualify for a smaller mortgage than they did before that date. This is a result of the latest changes in mortgage rules determined by the Office of the Superintendent of Financial Institutions (OSFI).
The governments new stress test will apply to all federally regulated banking institutions and will affect all conventional mortgages (more than 20% down payment or equity), including refinances, renewals and purchases. If you are buying a home using less than 20% down payment, you will still pay mortgage default insurance(CMHC, Genworth or Canada Guaranty) and qualify at the benchmark rate, currently 4.99% for most institutions.
No need to panic regarding your mortgage renewal. You won’t have to requalify at renewal time unless you make changes, such as moving it to another institution or increase the amount, etc. If you don’t qualify, your only choice may be to keep what you have and accept whatever is offered by your current lender.
At this time, it appears that provincially regulated financial institutions are not included. ie credit unions.
It appears that applications submitted to lenders prior to January 1, 2018 will be honored under the old rules. We are still waiting for further clarification from the government.
An important point is that many lending institutions have begun implementation early as requested by OSFI.
These changes may also greatly affect debt consolidations considering that you may not be able to refinance your home for as much as needed to pay out those high interest rate loans as you would presently be able to.
If you are considering a mortgage refinance, debt consolidation or purchase, you should consider talking with a mortgage professional as soon as possible.
Robert McLister of Ratespy wrote an excellent article in the Globe and Mail explaining further. Please see the attached. Preparing for OSFI