Stress Test 2.0.

Effective January 1, 2018, people with 20% or more down payment will be qualified at a rate 2% above the actual rate or the benchmark rate set by the government of Canada – whichever is greater.  We believe the amortization will remain at 30 years.  The full guidelines have not been released – please note that the the information below is based on how we believe things will unfold.   Currently the benchmark rate is 4.99%.

People with less than 20% down will continue to be require to qualify at the benchmark rate.  As the maximum amortization is set at 25 years, the qualification is still slightly less than those with 20% down.

 

Below is how one lender will be handling the change to the new rules.  We expect others to be similar.

–  If an approval on a legally binding purchase and sale agreement is issued before January 1 2018, the customer will qualify under the old rules.

– If an approval on a legally binding purchase and sale agreement is issued after January 1, 2018, the new rules will apply.

– Lender commitments are usually valid for a maximum of 120 days after the date an approval is issues or after a rate has been held.

 

The numbers below use 35% of total family income to qualify for a mortgage.  With excellent credit and low liabilities, lenders will often allow up to 39% of family income to be used for housing.  In the chart below, the qualifying payment is ONLY for qualification – actual payment will be Monthly payment.

Down payment greater than 20% approved before    Jan 1, 2018 Down payment greater than 20% approved after   Jan 1, 2018 Down payment less than 20%
Mortgage Amount Income required Monthly Payment Income Required Qualifying payment Income Required Qualifying Payment
200,000 $41,000 $883 $49,000 $1,114 $50,000 $1,145
250,000 $49,000 $1,104 $59,000 $1,393 $60,000 $1,431
300,000 $56,000 $1,325 $68,000 $1,672 $70,000 $1,718
350,000 $64,000 $1,546 $78,000 $1,950 $79,000 $2,004
400,000 $71,000 $1,766 $87,000 $2,229 $89,000 $2,290
450,000 $83,000 $1,987 $101,000 $2,507 $103,000 $2,576
500,000 $91,000 $2,208 $110,000 $2,786 $113,000 $2,863
550,000 $98,000 $2,429 $120,000 $3,065 $123,000 $3,149
600,000 $106,000 $2,650 $129,000 $3,343 $133,000 $3,435
650,000 $118,000 $2,870 $144,000 $3,622 $147,000 $3,721
700,000 $125,000 $3,091 $153,000 $3,900 $157,000 $4,008
750,000 $133,000 $3,312 $163,000 $4,179 $167,000 $4,294
800,000 $140,000 $3,533 $172,000 $4,458 $176,000 $4,580
850,000 $148,000 $3,754 $182,000 $4,736 $186,000 $4,867
900,000 $156,000 $3,974 $191,000 $5,015 $196,000 $5,153
950,000 $163,000 $4,195 $201,000 $5,293 $206,000 $5,439
1,000,000 $171,000 $4,416 $210,000 $5,572 $216,000 $5,725

 

  • Monthly payments are using a rate of 3.34% with 30 year amortization
  • Qualifying payment for approvals after Jan 1, 2018 is 5.34% (3.34% plus 2%) with 30 year amortization
  • Qualifying payment for less than 20% down payment is 4.99% with 25 year amortization.
  • Numbers to be used as a GUIDE ONLY. No guarantees to accuracy.  Verify with your mortgage professional.

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.