Effective January 1, 2018, the rules for mortgages in Canada have been changed again to reflect stricter guidelines that may now even effect even more borrowers.

In October of 2017, it was announced that a much larger number of borrowers, including those with down payments of 20% or more, would soon be required to undergo a stress test before being approved for their mortgage loan. While stress tests have been in place for borrowers with higher loan to value ratios since the beginning of last year, the change on January 1st of this year will mark the 7th change to the mortgage rules since July of 2008.

Mortgage stress tests are designed to ensure that borrowers will continue to be able to afford their monthly payments should interest rates increase by a significant amount. The federal government has instituted these stress tests as a way to decrease instances of default by limiting the amount of debt Canadians are able to take on.

Even if you have saved up to put at least 20% down on the home you plan to purchase, you may still be subject to a stress test before you can be approved for your loan. This process involves evaluating your borrowing risk against an interest rate that is 2 percentage points higher than the rate you would be offered in your mortgage contract.

For some buyers, this test is just a formality that won’t affect their ability to purchase their home. For many others, this test will require them to find a cheaper house to purchase or could even prevent them from getting financing altogether.

It is now more important than ever to work with an experienced and trustworthy mortgage professional who can help you navigate these strange new waters. Whether you are purchasing, renewing or refinancing your existing mortgage, give me a call today to find out how you may be affected and what we can do to make sure you still get the financing you and your family need!