Mortgage Stress Test in Review

The "new" mortgage rules are in review.

On October 17th, 2016, the Canadian Federal Government introduced “new” mortgage rules to help protect the Canadian economy. The rules protect the economy by preventing Canadians from taking on mortgages they can’t afford.

The “new” mortgage rules enforce a stress test that first time home buyers must take. The test measures an individual’s potential to continuously make payments if rates rise. Another requirement is that 39 percent of an individuals income must cover standard monthly expenses including mortgage payments. And, all debt payments of that individual must remain below 44 percent of their income.

What is Happening Now

The Canadian Government is now reviewing the effects of the “new” mortgage rules. On May 09, 2019, Justin Trudeau attended the Canadian Home Builders’ Association Conference in Niagara Falls. During the conference, the industry group requested that the Prime Minster increase the maximum atomization of mortgages from 25 to 30 years.

As a response, an option was presented to introduce a new shared equity program. The program would have the Canadian government take stake in select home purchases. In addition, the amount of funding an individual can take from their retirement savings plan would be increased.

A reason behind the shared equity program is that the government wants to stabilize the market with out, “having an overly negative impact elsewhere around the country.” In addition, the stricter regulations prevent Canadians from taking on debt they can not handle.

For Those Who Need Help

The current debt to disposable income ratio is 174%, which is one percent down since February. The debt to disposable income ratio is discussed in our last article, INTEREST RATES MAKE FOR A ‘THRIFTY’ 2019. This ratio is beneficial because it can be used as a measure to how much money you should be spending.

But for those that need help, we are Licensed Insolvency Trustees with the knowledge and experience to address any financial issue. Our expertise can address any financial challenges you may face, including managing credit and most importantly finding a way to reduce or eliminate overwhelming debt.

If you need help, you can contact us by emailing or call us at 416 736 4357 (HELP). In addition, you can also book a free consultation with no obligations by filling out the contact form on our home page.

Make an appointment today for a custom-tailored solution specific to your situation. We look forward to assisting you.