On October 17, 2016, the federal government of Canada introduced new mortgage rules affecting borrowers across Canada. The new rules were meant to “Stress Test” and toughen the mortgage approval process; especially for borrowers with less than 20% down payment to make sure that mortgage affordability is not affected in the event of future rate increases. The federal government announced that all mortgage applications with less than 20% down payment must qualify based on the bank of Canada posted rate, which is currently 4.65%.

As of November 30, 2016, the government will impose new restrictions for low-ratio or conventional mortgages that require mortgage insurance on the back end. After November 30, the maximum insurable mortgage even though conventional will not be available for properties over $1,000,000, investment properties and for amortizations over 25 years; these mortgages must also qualify based on the 5-year posted rate of 4.65%, regardless of the rate on contract.

If the lender does not require mortgage insurance, the old rules will still apply after November 30, 2016. We understand that the rules are a little confusing, therefore, if you do have any questions or need any clarification, please do not hesitate to let us know.