Get a free, no obligation personal loan quote with rates as low as 6.99%
Get Started You can apply with no effect to your credit score

The Liberal Government has just announced several major changes to the current housing and mortgage rules. These changes are being put into place to help prevent Canadian homebuyers from taking on mortgages they can’t afford. As interest rates are currently lower than we’ve seen in a while, purchasing a house right now is, generally speaking, more affordable. But, the main issue that the government is addressing with these new rules is; will Canadians be able to continue to afford their homes if and when the interest rates rise (are you house poor? Read this).

With these new rules, the government is also hoping to deal with the concerns that many Canadians have about foreign buyers.

What are the Current Canadian Housing and Mortgage Rules?

Previously, if a consumer wished to purchase a house with a down payment that was less than 20%, but more than 5%, they needed to have high ratio mortgage insurance backed by the federal government through the Canada Mortgage and Housing Corporation (CMHC). They would also be subject to a stress test to ensure that they could, in fact, afford their mortgage. This type of insurance would protect the lender in the instance that the borrower became unable to continue to make payments and defaulted on their loan.

On the other hand, if a consumer had 20% or more for a down payment and they were able to obtain low ratio mortgage insurance from a private insurer (either Genworth Financial Mortgage Insurance Company Canada or Canada Guaranty Mortgage Insurance Company, this insurance is backed by the federal government and subject to a 10% deductible), a stress test would not be performed.

Check out how you can avoid paying CMHC insurance.

Change No.1

As of October 17, all consumers looking to obtain an insured mortgage will need to pass a stress test, regardless of their down payment. This means that even if you have 20% or more for a down payment, you will need to pass the stress test. The government is looking to assure that the borrower will be able to afford their mortgage should the interest rates increase. This means you’ll need to qualify for a mortgage at the interest rate negotiated in your mortgage contract and at the current Bank of Canada’s five-year fixed posted mortgage rate (as of October 7, 2016, the posted rate is 4.64%).

The stress test will also assess the total percentage of income required to carry the cost of owning a home and the total debt service ratio of all potential borrowers. This means a borrower can spend no more than 39% of their total income on owning a home and their total debt service ratio (this included all other debt payments you’re currently making) must be less than 44%.

Looking for tips on how to save for a down payment? Click here.

Change No.2

As of November 30, all consumers looking to obtain government-backed insurance for low ratio mortgages will have to meet several new requirements.

  • The mortgage must have an amortization period of 25 years or less.
  • The purchase price of the house in questions must be less than $1 million.
  • The property in question must be owner-occupied.
  • The buyer must have a credit score that is at least 600.

Change No.3

Homeowners will now also be required to report the sale of their primary residence to the Canada Revenue Agency during tax time. It’s important to note that the capital gains tax will still be waived. The main purpose of this new regulation is to prevent foreign buyers from purchasing Canadian homes, flipping them, and then claiming the capital gains exemption when they sell the house.

Change No.4

Finally, the Canadian government is looking to change the level of risk lenders take on when they provide a consumer with a mortgage. Currently, the government assumes 100% of the risk in the event that an insured mortgage goes into default. The government is planning a proposal that will require lenders to take on a percentage of that risk.

Caitlin Wood, BA avatar on Loans Canada
Caitlin Wood, BA

Caitlin Wood is the Editor-in-Chief at Loans Canada and specializes in personal finance. She is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. Caitlin has covered various subjects such as debt, credit, and loans. Her work has been published on Zoocasa, GoDaddy, and deBanked. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security.

More From This Author

Special Offers

More From Our Experts

https://loanscanada.ca/wp-content/uploads/2023/09/GlobeMailTopCompanies2023-1.png
Loans Canada places No. 228 on The Globe and Mail’s fifth-annual ranking of Canada’s Top Growing Companies.

By Caitlin Wood, BA
Published on September 29, 2023

Loans Canada is excited to announce it has made it onto the Globe and Mail’s Top Growing Companies list for the second year in a row.

https://loanscanada.ca/wp-content/uploads/2023/09/Finder-Awards.png
Finder Awards Finalists: Personal Loans Customer Satisfaction Awards 2023

By Priyanka Correia, BComm

Loans Canada is happy to announce it received the finalist award in the Best Personal Loan Search Platform category.

https://loanscanada.ca/wp-content/uploads/2016/12/caution-1.jpg
Beware of Fraudulent Lenders Impersonating Loans Canada

By Caitlin Wood, BA

A note to our clients about fraudulent lending practices and illegal upfront fees.

https://loanscanada.ca/wp-content/uploads/2022/10/How-To-Pay-Your-Taxes-With-A-Credit-Card-Through.png
How To Pay Your Income Taxes With A Credit Card

By Lisa Rennie

If you’d like to pay your taxes using a credit card, you’ll need to use a third-party service provider like Plastiq or PaySimply.

https://loanscanada.ca/wp-content/uploads/2021/08/Climate-Action-Incentive-CAI-1.png
What Is The Canada Carbon Rebate (CCR)?

By Bryan Daly

The Climate Action Incentive Payment (CAIP), or Carbon Tax Rebate, is quarterly benefit paid to eligible Canadians in

https://loanscanada.ca/wp-content/uploads/2021/03/Canada-Workers-Benefit-CWB.png
Can You Claim The Canada Workers Benefit (CWB) In 2024?

By Bryan Daly

The Canada Workers Benefit is a refundable tax credit for individuals earning a low taxable income of $3,000 - $24,112.

https://loanscanada.ca/wp-content/uploads/2020/12/Student-Tax-Credits-and-Deductions.png
Student Tax Credits In Canada

By Chrissy Kapralos

Similar to how there are specific tax credits and deductions for businesses, seniors, and parents, there are student tax credits in Canada.

https://loanscanada.ca/wp-content/uploads/2021/04/Pay-Less-Taxes-Canada.png
How To Pay Fewer Taxes In Canada

By Bryan Daly

People are always trying to figure out how to save money on taxes in Canada. We present the best ways to legally pay less tax in Canada.

Recognized As One Of Canada's Top Growing Companies

Loans Canada, the country's original loan comparison platform, is proud to be recognized as one of Canada's fastest growing companies by The Globe and Mail!

Read More

Why choose Loans Canada?

Apply Once &
Get Multiple Offers
Save Time
And Money
Get Your Free
Credit Score
Free
Service
Expert Tips
And Advice
Exclusive
Offers

Build Credit For Just $10/Month

With KOHO's prepaid card you can build a better credit score for just $10/month.

Koho Prepaid Credit Card