In addition to cracking down on tax leakage by foreign money, another change is that from now on, all insured mortgages must undergo a “stress test” that ensures a borrower’s ability to make their mortgage payments at a higher interest rate.
Effectively, that means borrowers will be tested against their ability to pay their mortgage if actual rates were as a high as the Bank of Canada’s conventional five-year mortgage rate, which is currently 4.64 per cent.
That requirement was already in place for many borrowers, including so-called “high-ratio” mortgages for people with small down payments, and borrowers who borrowed money on terms of less than five years. But from now on, any insured mortgages will be tested against that higher bar. Anyone who already has a mortgage, or who has already applied for mortgage insurance, is exempt from the new rules, which will formally kick in on October 17, 2016.
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