What stricter mortgage rules mean for you

The Office of the Superintendent of Financial Institutions (OSFI) is drawing a line in the sand for anyone who applies for an uninsured mortgage in Canada in 2018: Qualify at the new restrictive standard or explore alternative options.

Here's what you need to know about the new mortgage stress test:

1. Takes effect January 1, 2018

2. Affects applicants for low ratio mortgages who are seeking to refinance or purchase and have home equity (or a down payment) of 20% or more.

3. Does not affect renewals with the same lender. If switching to another lender, the stress test will apply.

4. The 'stress test' aspect of the new rules comes in the form of higher qualifying rates. Here's how it works:

• Today's posted rate is 4.99%.
  
• An applicant may be able to secure a 5-year contractual fixed rate of 3.50%
  
• When the stress test is introduced, the applicant must qualify at the posted rate or the contractual 5-year fixed plus 2 percent, whichever is higher.
  
• For example, 4.99% posted rate or 3.50% + 2%. The applicant must qualify at 5.50%. He or she will be able to afford less house than under the previous rules. And some applicants will not qualify. They may need a co-signer. Or may seek a solution with an alternative lender through a mortgage broker.
  

5. Some lenders may allow applications that start in 2017 but are funded in 2018 to qualify via 2017 rules.

6. Applicants can lower their payments by choosing a longer amortization period such as 30 years or more at select lenders.

7. Credit unions may or may not adopt the new OSFI qualifying standards. Your mileage may vary.