Starting in January 2018, new regulations will make it tougher for Canadians to qualify for uninsured loans, affecting consumers with down payments of 20% or more. The new stress test is the latest in a series of policy changes and rules aimed at ensuring Canadians can afford their homes even if interest rates rise.
Today, uninsured borrowers can qualify for a mortgage at rates as low as 2.97% on a 5-year fixed, however, in a few months that hurdle will jump to almost 5%. This means that borrowers will need almost 20% more income to qualify for the same size mortgage they can get today. But mortgage industry experts are now pointing out a loophole. The Office of the Superintendent of Financial Institutions did not regulate the length of the amortization used in the qualifying calculation, which involves ensuring that only a certain percentage of your monthly household income be dedicated to housing costs. A longer amortization period reduces the monthly payment at a given interest rate, meaning loan providers could extend amortizations from 25 to 35 years, potentially create a smaller monthly payment that would qualify more buyers.
The only constant in life is change. Although this may prevent or discourage home buyers, the amortization change loophole could mitigate the impact.


