Important Changes to Mortgage Qualifications in Canada

Prior to October 17, 2016, mortgages with variable rates or fixed terms under 5 years typically require that you qualify at a higher rate (called the “benchmark qualifying rate”).  As of Monday, October 17, 2016 all high ratio mortgage buyers opting for fixed terms of 5 years or longer will need to qualify at the 5-year benchmark rate even though their contract rate is significantly lower.


A well qualified borrower opting for a 5-year fixed term may obtain OAC (on approved credit), a rate of 2.39% but will now need to qualify at the benchmark rate of 4.64%. 

Assuming an income of $80,000, this borrower qualifies for a $475,000 mortgage under current rules based on 25-year amortization and 2.39% contract rate OAC.

Under new rules, the same borrower qualifies for $375,000 mortgage with the same 25-year amortization at a 4.64% benchmark qualifying rate, even though his mortgage rate is actually 2.39%..

This means that a borrower with 5% down who could previously afford a property worth $500,000, can now buy a property worth a maximum of $395,000 once the new rules come into effect.

Upcoming Changes:

As of November 30, 2016, the same rules above will apply to mortgages that lenders ensure that are low ratio mortgages (higher than 20% down payment.)

These changes will also affect refinancing.

Barbara Grumme

Barbara Grumme

Sales Representative
CENTURY 21 Today Realty Ltd., Brokerage*
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