What Do Recent Mortgage Rule Changes Mean to You?

todayNew rules announced by the Federal Government on October 3 will make it more difficult to qualify for a loan.

Effective October 17, all homebuyers requiring mortgage insurance must quality based on the posted rate for a five-year term, now 4.64 per cent.  The impact of this change is that many consumers will receive smaller loans.

In Canada, mortgage insurance is required federally on mortgages with a down payment of 20 per cent or less. This insurance, which protects the lender in case of borrower default, gives lenders the flexibility to offer borrowers with low down payments the same low interest rates they would offer to homebuyers with more equity.

The largest private mortgage default insurer in the country, Genworth Canada has stated “homebuyers would need to consider buying a lower priced property or increase the size of their downpayment.”

If you have any questions about the new mortgage rules or any other real estate matters,  feel free to “leave a comment” below and we’ll get in touch.  Of course you can always call us at 519.586.7922 or using “Ask Us Anything” at EriesEdge.com.

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10 thoughts on “What Do Recent Mortgage Rule Changes Mean to You?

  1. Hi, much has been made of how these new mortgages rules will affect people who are putting down less than 20% because all insured mortgages are now going to have to be “stress tested” at a a higher rate. However, do you think there will be any effect on buyers who are putting 20% or more? I understand that although mortgage insurance is not required for this group of people, some banks and lenders will take out portfolio insurance on these mortgages. Does this mean that people who put down 20% or more will also have to be “stress-tested”?

    1. There’s a great article in The Globe and Mail that further explains the recently announced rule changes. You can read it at by clicking here.

      Note that mortgage insurance is required when homebuyers make a down payment of less than 20 per cent of the home’s purchase price. However, we have experienced some situations where buyers who have more than a 20% down payment may also need insurance as a requirement of the loan from the lender.

      The purpose of mortgage insurance is to protect lenders in the event of default.

  2. What time on Monday does this take effect? As I am waiting for my acceptance on Monday for the house I have an offer in on.

    1. Hi Chantel

      Thank you for your question, and it’s a very important one. The changes will take effect 12:01 am on Monday. However, you should speak to your bank or mortgage broker immediately because according to an article in the Huffington Post – “If you were pre-approved prior to the rule change, this does NOT mean you will still be approved for the same amount and/or rate, especially if your lender based their pre-approval on a fixed rate, as that rate will no longer be available.”

      It appears if you have not signed a mortgage commitment by Monday, you will now have to qualify at the new rate which will likely result in a decrease in your approved loan amount.

      We would recommend contacting your Realtor as well as your mortgage advisor as soon as possible.

    1. You are okay then. If an approval was sent by your lender to CMHC before Monday, then you are covered. Don’t expect to hear back from your lender for a couple of days as CMHC was swamped with approvals over the past weekend.

  3. I purchased a new construction home in Sept and my tentative possession date is June 2017. Will this affect me since closing isn’t until after March 17, 2017?

    1. Hi Jane

      Thank you for your question. According to the information in the articles in order to avoid these new rules the property has to close before March 17, 2017. However, if you have already signed a mortgage you may be protected. I would recommend that you reach out to your mortgage broker ASAP to get a more accurate answer.

      GOOD LUCK!

  4. If I am putting a 28% down in purchasing a new house, in my understanding I do not have to go thru the stress test correct? What are my chances of getting approved for a new mortgage.
    In my situation I gave my old house with still an existing mortgage passed to my daughter to continue it but now I am buying a new house and getting a new mortgage, the credit union has turned us down. I don’t understand why, & he never gave us the reason. We went to the same credit union where we had our mortgage before, we never signed any papers to have our credit scoring checked, this is a big puzzle to me, did the CU did it right?

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