New Mortgage Rules and Their Effects

The Canadian Government announced that it would be changing the rules regarding mortgages for Canadians. This new rule would came into effect on January 1, 2018 and how Canadians are approved for mortgage loans for houses.


Rules for Insured Purchasers

Currently anyone who purchases a home with less than a 20% down payment is required to pay a one-time insurance fee to the bank. This fee is simply just reassurance to the bank, in the case that a mortgage payment cannot be made. However, under the new regulations, buyers will still have to pay the insurance fee, but they will also have to be pre-approved for a higher interest rate. This rate will be at least 2% higher than the initial mortgage rate that they negotiated. First time home buyers will need a higher amount for a down payment and prove they can attain that extra 2%.


Rules for Uninsured Purchases

Under the current rules anyone who purchases a house and puts a down payment of 20% or greater of the mortgage is not required to purchase insurance from a bank. However, with the new legislation, even those who hold a down payment of 20% or greater will be required to pass a “stress test,” now meaning they will have to qualify for a rate 2% greater than what they had initially negotiated.


Effects for Current Homeowners

Under the new regulations, current homeowners will be exempt from the stress test, but this is only if they choose to stay with their current institution. Implementation of this regulation means that when homeowners are eligible to renew their mortgage, current homeowners will be restricted from discovering new lower rates.


Effects for First Time Home Buyers

The changes to regulations have caused some changes in the real estate market. First time home buyers with 20%. This means that more homes are now being purchased a little more quickly than before and the new regulations will not affect these buyers. It can be difficult to plan, especially for first time buyers.