At the moment anyone who puts down at least a 20% value of the home as a down payment, does not have to pay for mortgage insurance and is also considered an uninsured buyer. Only those who have put down less than 20% on a down payment of their house are required to go through a stress test of their finances. This test consists of ensuring the borrower would be able to pay back the loan if the interest rates become higher than they are today.
An example of how the new guidelines will affect those looking for a house in 2018. A colleague told me that he has a client with kids going to Oakville Trafalgar High school. They are currently in a rental waiting for their residency papers so the they can avoid the 15% foreign taxes. Currently they have $400,000 to use as a down payment and therefore under the current rules will not need CMHC to get a mortgage and the test rules allow them to purchase a home up to 1.4 million in value.
When the new rules come into effect on January 1, 2018 my buyer will only qualify to buy a home worth $1,150,000.00 which will push his family and kids out of the area they were originally looking and perhaps much further west into Burlington. If he buys before Dec. 31st, he can still close in 2018 without the stress test, but an Agreement of Purchase and Sale is required prior to the date.
This will also affect first time buyers purchasing power by a minimum 10-15% , but even some existing qualified mortgages with large down payments won't meet the new criteria and moving to other institutions to gain better rates won't be possible as stress tests will not allow them to qualify at other institutions.
This will affect all levels of our purchases including those with $2,000,000 mortgages and $4,000,000 worth of purchasing power. Under the "Cause and Effect rules" it will also affect our Sellers as the markets purchasing power will also be reduced for those who require mortgages "of any type" to qualify under the new stress test.”