In 2 weeks time, many Canadians are going to find it much more difficult to buy the home they want. New mortgage rules are coming into effect at CMHC which will require all high-ratio mortgages to qualify for 5 year mortgages using the Bank of Canada qualifying rate (currently 4.64%) instead of at the actual mortgage rate (currently about 2.44%).  High ratio mortgages are those with less than 20% for the down payment or as equity in their house.  In other words, after Oct. 17th high ratio mortgage applicants will have to have enough income to pay a mortgage at almost twice the interest rate they will actually be paying.

The changes are going to have a big impact on many first time home buyers and those trying to upgrade to a larger house.  Properties that can be purchased today could suddenly, after October 17th, become very much out of reach under the new rules.

For example, currently a client making $50,000.00 verifiable, gross annual income (assuming no other debts) could purchase a $300,000.00 home with $15,000.00 (5%) for their down payment.

After October 17th, the same client’s maximum purchase price will be $235,000.00 with that same $15,000.00 down payment.

That’s a reduction of $65,000 in their purchasing power and in our area takes them from buying a starter home or half duplex down to a condo or nothing at all.

These new rules will NOT effect clients with current accepted offers who have their mortgage financing approved.  So the good news is that if you get a purchase contract in place and your mortgage organized before October 17th, you will qualify under the current rules.

If you have any questions please let us know.

You can find more details of the government’s announcement here: