With Canada’s new mortgage rules that came into effect on January 1, 2018, we want to help make sure you know how these changes may affect you. Our TD Mobile Mortgage Specialists are ready to help you understand and guide you through these upcoming changes.
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At a glance
Videos about the new mortgage rules
What you need to know about the new mortgage rules in Canada
Whether you’re a buying a home or refinancing, here are the basics of what you need to know about the new mortgage rules:
New rules took effect January 1, 2018: Check with your TD Mobile Mortgage Specialist on how this can affect your mortgage loan.
Home buyers with a down payment of 20% or more are now subject to stricter qualifying criteria (also known as a "stress test") that would determine whether a homebuyer would be able to afford their principal and interest payments should interest rates increase. This stress test would use either the 5-year benchmark rate published by the Bank of Canada or the customer's mortgage interest rate plus 2% - whichever is the higher.
New rules don’t apply if you’re renewing your TD Mortgage: The new rules only apply to new mortgage loan agreements. They do not apply when renewing your existing mortgage loan with TD.
Understand what type of mortgage best fits your means: We can help make sure you are prepared with the knowledge you need to make your mortgage decision now that the new rules have taken effect. Learn more
Are you ready? Follow our quick infographic quiz to see how the new mortgage rules might affect you. View the infographic.
We’ve demystified some of the most important points about the new mortgage rules so you can make an informed decision when it comes to buying your home.
What is the new mortgage stress test?
Don’t let the idea of a test stress you out. The stress test is actually a set of rules to help home buyers be confident that they’re buying the house they can afford now and in the future. Watch the video to learn more about stress test, and how it differs based on the amount of your down payment, and the type of mortgage you’re looking for.
What does this mean if I’m buying a home?
Making sure you can afford your mortgage over the longer term is very important, as is knowing how much home you can afford to still maintain your lifestyle. Watch the video to understand how you can navigate the new mortgage rules, and how working with a TD Mortgage Specialist can help you understand what type of mortgage best fits your needs.
What if my mortgage is up for renewal?
If you’re renewing your mortgage, you won’t be subjected to the stress test if you choose to stay with your existing bank. Watch the video to learn more about how the new mortgage rules can impact you if you’re planning to change mortgage lenders.
What if I don’t qualify under the new rules?
Buying a home can be stressful and emotional. But it's important to be realistic about what you can afford today. Watch the video to get a better understanding of how a TD Mobile Mortgage Specialist can help you stay informed about what you can afford under the new mortgage rules, and how you can make the best decisions for your needs in the future.
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A Down Payment is the amount of money you have towards purchasing your home. Many homebuyers make down payments of 5% to 20% of the total value of the home. The purchase price minus the down payment is the amount that generally requires financing from a bank or other financial institution.
Let's talk about how you might be impacted by mortgage stress test rules. First, all potential home buyers fit into one of 2 categories: those who have less than 20% down payment, and those who have 20% down payment or more.
If you're a home buyer and you have a down payment of less than 20%, the way that lenders qualify you hasn't changed: you're going to be qualified at the higher of your mortgage interest rate, or, more commonly, the Bank of Canada's 5-year benchmark rate. So there's already a stress test in place for home buyers who have a down payment of less than 20%.
The change that was introduced in 2018 applies to home buyers with a down payment of 20% or more. For these borrowers, the government introduced a new mortgage qualification rule. This rule is in place to help these home buyers feel more confident that they're buying the house they can afford both now, and in the future.
Under the rule, homebuyers with a down payment of 20 per cent or more need to undergo a mortgage stress test that uses either the Bank of Canada's 5 year benchmark rate or the customer's mortgage interest rate plus 2 per cent – whichever is higher.
For example, if your rate is 3.3 per cent, you'll be "tested" on whether you can afford to make your mortgage payments at the rate of 5.3 per cent.
To be clear, if you're in a fixed rate mortgage, your interest rate wouldn't go up if the Bank of Canada increases their rate. But the test is in place to be sure you can continue to afford your mortgage if rates have gone up when it's time to renew.
Opening Graphic
What is the mortgage stress test?
Graphic 1
Down Payment
<20%
Graphic 2
Down Payment
>20%
Mortgage Stress Test
Bank of Canada 5 year Benchmark Rate
Or
Customers Mortgage Rate + 2%
Whichever is higher
For Example
Your rate is 3.3% so you’ll be tested at 5.3%
Imagine you're looking at buying a home for $500,000 and have 20 per cent to put down. If you choose a 3 year term at a rate of 3.4 per cent with a 25 year amortization, your mortgage payments would be approximately $2,000/month. With the stress test, we'd check that you could afford your mortgage payments at a rate of 5.4 per cent, which is about $2400/month. In this example, we want to determine if you can comfortably manage a $400 increase in monthly payments.
Making certain you can afford your mortgage over the long-term is very important, as interest rates could continue to rise. Even more likely is that you may have new or additional expenses like travel, having a family, or education costs.
Buying a home is exciting, but it can be stressful too. Take the emotion out of your purchasing decision by knowing how much home you can afford and still maintain your lifestyle and while also saving for the future.
A TD mortgage advisor can answer your questions and can help you understand what type of mortgage best fits your needs.
Opening Title
What does the stress test rule mean if I’m buying a home?
Graphics 1
$500,000 Home
20% Down payment
25-year Amortization
3 year term
3.4%
$2,000/mo
How will the new mortgage rules affect mortgage pre-approvals? TD Canada Trust is ready to answer your questions and guide you through these changes. For more information visit https://go.td.com/2A34Rv4
The new mortgage rules come into effect on January 1, 2018.
Under the new Canadian mortgage rules, home buyers who have a down payment of 20% or more will be subject to a stress test. The stress test will use either 5-year benchmark rate published by the Bank of Canada or customer's mortgage interest rate plus 2%, whichever is the higher.
If you already have your mortgage pre-approval and purchase your home before your pre-approval expires, you are not affected by the new rules, regardless of when it closes.
You can use the TD Mortgage Affordability Calculator to estimate your down payment and compare which mortgage suites you best.
Contact a TD Mobile Mortgage Specialist to learn more about the new mortgage rules and to find a mortgage solution that best fits your needs.
If you're a homeowner renewing your mortgage, you aren't subjected to the stress test if you choose to stay with your existing bank.
If your mortgage is up for renewal and you decide to move to a new lender you'll be treated as a new borrower and need to qualify at the higher, stress test rate.
Similarly, if you're asking to borrow more money from your current lender by refinancing your mortgage, you'll also be subjected to the higher stress test rate.
Whether you're buying a home, renewing or refinancing, it's a good idea to speak with a mortgage advisor who can help guide you through the process and answer your questions, so that you can make decisions that are right for you and your family.
Opening Title
My mortgage is up for renewal. What does this mean for me?
Graphics 1
Mortgage is up for renewal
New mortgage lender
Qualify at the higher Stress Test rate
Graphic 2
Current lender
Refinancing
Mortgage
Higher Stress Test Rate
If you don't qualify for the mortgage amount you want under the stress test rules, you may need to consider a less expensive home or continue saving towards your down payment.
Buying a home can be stressful and emotional. But it's important to be realistic about what you can afford, not only today, but also in the future, so that life events and unexpected expenses don't take away your ability to afford your home down the road.
Being informed and having the right information is key to making decisions that are right for you – now and in the future.
Speak with a mortgage advisor who can help guide you through the process and answer your questions, so that you can make the best decision for you and your family.
Opening Title
What are my options if I don’t qualify for the mortgage I want under the stress test mortgage rules?
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