Offices in Ottawa and Perth
(613) 722-1500

CONTACT US (613) 722-1500

What do the new mortgage qualification rules mean for those looking to buy a home?

What do the new mortgage qualification rules mean for those looking to buy a home?

By:

Posted January 17, 2018

If a house is on your wish list for 2018, you may have heard about changes to the qualification rules for mortgages. There are new rules in effect as of January 1, 2018 that will affect your purchasing power, so it is important to understand these changes before beginning the search for your dream home.

In short, the Office of the Superintendent of Financial Institutions (OFSI) has put new rules into place that apply to all federally regulated financial institutions.  These rules, or the “stress test” as it has been called, require all people obtaining conventional mortgages to qualify at the greater of a rate 2% higher than their contract rate or the Bank of Canada’s five-year benchmark rate. Furthermore, this test applies even to uninsured mortgages, which would be for those people who have a down payment of 20% or more.

What does this mean for you? Essentially, the new rules reduce the size of the mortgage you are able to qualify for, which results in you having less money (between your down payment and mortgage) to spend on a home. In some cases, your purchasing power could be reduced by roughly 20% so this could result in having to settle for a less expensive house than you could have been able to purchase prior to January 1, 2018.

For those looking to refinance, the guidelines will apply to new mortgages but not renewals.  While this may seem like a positive (i.e. that financial institutions are not under obligation to apply the stress test for existing borrowers who wish to renew their mortgage), these institutions may end up charging a higher interest rate (knowing that a client could not qualify under the stress test and be able to move to a different lender).

If you are looking to purchase or refinance and need assistance, feel free to contact me.  I can assist with the transaction, as well as provide referrals to other real estate professionals, including mortgage brokers and real estate agents.

This blog post was written by Jason Peyman, a member of the Real Estate team.  He can be reached at 613-369-0376  or at jason.peyman@mannlawyers.com.

More Resources

Blog |
Wills, Trusts and Estates
By: 

Posted November 28, 2023

As a lawyer who has worked in the field of Wills and Estates for the last three years, I get the following question quite a[...]
Blog |
Family Law
By: 
Amongst the profession, we often refer to domestic contracts prepared by the parties themselves without legal advice as “kitchen table agreements”. In May 2023, the[...]
Blog |
Wills, Trusts and Estates
By: 

Posted November 7, 2023

What is a Power of Attorney document? A Power of Attorney is a legal document that authorizes someone else, known as your “attorney” to act[...]
Blog |
Real Estate
By: 

Posted November 6, 2023

If you enter into an Agreement of Purchase and Sale to buy a new build home, your offer could be conditional on having your lawyer[...]
Blog |
Wills, Trusts and Estates
By: 
Do I need a Will? A short answer is most likely. If you possess assets of value, such as chequing or savings accounts, investments, a[...]
Blog |
Real Estate
By: 

Posted October 31, 2023

The Status Certificate is a document written by a condominium corporation that discloses certain financial, governance, and legal information about the condominium corporation and a[...]
Jason Peyman

Jason Peyman

My practice focuses on residential real estate, as well as corporate/commercial law. I pride myself on providing clients with help throughout the various stages of a real estate transaction and making the process of buying or selling a home as simple as possible. In addition, I also enjoy assisting clients with other real estate issues, such as preparing co-tenancy agreements and advising clients regarding boundary disputes. For the firm’s corporate/commercial clients, I am involved in preparing and reviewing commercial agreements, such as asset and share purchase agreements, shareholder agreements, leases, and license agreements. Born in Kingston and raised in the Greater Toronto area, I obtained a Bachelor of Business Administration from the Schulich School of Business at York University, where I was also President of the Sports Business Club. I am a graduate of the joint law degree program between the University of Ottawa and Michigan State University. During law... Read More

Read More About Jason Peyman

Subscribe to Our Newsletter

"*" indicates required fields

Name*
Consent*
This field is for validation purposes and should be left unchanged.