Making sense of the new 'MORTGAGE STRESS TEST'. It's complex.

Here's what it all really means.   

As of January 1, 2018, you will need to pass a new “Mortgage Stress Test” (MST) to qualify for a mortgage loan at a bank. And it won’t matter how much you have to put down. Even if it’s 20% or over, you’ll still be subject to the MST . Once you pass the test, you’re not required to actually make a 20% down payment  - you can still take advantage of a lower one and a lower mortgage rate. But first you have to pass 'the test'. 


The Government wants you to prove you can afford payments at a higher interest rate than the actual rate in your mortgage contract.   

The Mortgage Stress Test (MST) has been typically applied to insured mortgages, in which the borrower had put down less than 20% towards their down payment. But now it's for everyone applying for a mortgage.

Guess what? Credit unions are not bound by the new rules but that may change as they've historically followed the banks in the past.  

This stress test will automatically reduce everyone’s borrowing capacity by a minimum of 18.5%.

The larger the gap between your pre-approved interested rate and the stressed rate will further impact/reduce your borrowing capacity.The main effect will be felt by 1st time buyers because no matter how much money anyone puts down, they still have to pass the stress test.


The new qualifying rate for uninsured mortgages (ie with 20% or more down) is ‘the greater’ of the Bank of Canada’s present 5-year fixed rate of   4.99% OR 200 basis points above your contractual mortgage rate. So if you’ve been awarded a 3% mortgage rate, you now have to ‘qualify’ for a 5% one. If it's 3.2% your qualifying rate is 5.2% and so on.

Even if you were pre-approved at 2.49%, your mortgage would now be subjected to a stress-test against a rate of either 4.49% (current rate +2%), or against the posted rate of 4.99%. Since the posted rate is higher, this is the rate that will be used in the stress test.  


There may be. Currently, the new rules don’t limit the number of amortization years. Extending the amortization from 25 years to 30 or even 35 years returns about 18% purchasing power back to you, the Buyer.  We will have to see the final decision, though.  Note: there are only a few banks which offer 30 or more amortizaiton years and they do charge a slight rate premium.   


To a lender, affordability translates into two things: Gross Debt Service Ratio (GDS) and Total Debt Service Ratio (TDS). GDS and TDS are two mortgage formulas that lenders use to determine exactly how much money they are willing to lend you.

As of January 1, 2018,  the maximum GDS (Gross Debt Service) ratio is 39%  and TDS (Total Debt Service) is 44%. (Note: while the guidelines state your GDS should be no more than 32% and your TDS should be no more than 40%, most borrowers with good credit and a reliable income will be allowed to exceed these guidelines. The maximum GDS is 39% and the maximum TDS is 44%)

What is Gross Debt Service (GDS)?

A GDS ratio is the percentage of your income needed to pay all of your monthly housing costs, including mortgage payments of principal, interest, taxes, utilities, and real estate taxes.

You’ll also need to include 50% of your condo maintenance fees, if applicable. Your GDS has to be 39% or lower to qualify for the mortgage.

To calculate your GDS ratio, you’ll need to add all of your monthly housing-related costs and divide it by your gross monthly income. Then multiply that sum by 100 and you’ll have your GDS ratio

What is Total Debt Service (TDS)?

Your TDS ratio is the percentage of your income needed to cover all of your debts. The debt ratio formula calculation is the same as one for the GDS, except all of your monthly debts are taken into consideration. This includes car payments, credit cards, alimony, and any loans. Your TDS has to be 44%  or less.

To calculate your TDS ratio, add all of your monthly debts and divide that figure by your gross monthly income. Then multiply that sum by 100 and you’ll have your TDS ratio.

Your GDS and TDS ratios allow lenders to know if your income will cover the costs of your mortgage. If your GDS & TDS are higher than 39% and 44%, respectively, try and lower your debt before seeking out an alternative lender. Those lenders will likely have higher interest rates plus higher loan fees. No lender is judging whether or not you deserve a home;  they’re looking at you as a potential risk and calculating that they can collect the money you’ll owe them. Over the long-term.

In addition to the GDS and TDS figures there are other basic expenses like transportation and food. So you want the ratios to be as low as possible to account for these other costs.


  •           TDS/GDS:  Make a greater down-payment, which decreases your mortgage debt and monthly mortgage costs.
  •           TDS/GDS: Increase your (gross) household income.
  •           TDS only : Reduce your current debt obligations (such as car payments, credit card interest, pay down/off credit cards)


  1. Prior to January 1st: If there is a firm Agreement of Purchase and Sale contract in place prior to January 1st,  then all lenders will be honouring the “old” rules. But not after January 1st. But there is one lender that is honouring these old rules for 120 days, to allow Buyers to purchase and close prior to the end of April. Of course, this is if you've qualified and have a pre-approval in place prior to Jan 1st with this specific lender.
  2. If someone applies for financing after January 1st,  BUT has a firm Agreement of Purchase and Sale contract in place before this, they DO NOT have to qualify under the new rules.  They qualify under the old rules – they are grandfathered.



If, on renewal, you stay with your existing lender, then you don’t have to pass the stress test again However, if you change lenders at mortgage renewal time, you may have to qualify and pass, but it’s not yet clear if this will be the case   Lenders are thrilled about one thing: customer retention. As many as one in six people, renewing their mortgage, could be trapped at their existing bank because they can't pass the stress test at another lender. And if a bank knows you can't leave, it may very well offer sub-par rates.


SCENARIO 1: Prior to January 1st, 2018

A family has an annual income of $150,000. They've been approved for a 5-year fixed mortgage at 2.69%, with 20% down amortized over 30 years.  

They can afford a purchase price of $1,000,000.


SCENARIO 2: After January 1, 2018  

This family’s income is still $150,000. They have been offered a 5-year fixed mortgage at 3.34%, with 20% down amortized over 30 years. Because it’s less than 4.99%, 200 points must be added and their new qualification rate is 5.34%. 

They can afford a purchase price of $804,520.

This is an affordability difference of $195,480 (less 19.458% than in 2017)


With sincere thank you's to:

Ben Poulin, CIBC Imperial Service Financial Advisor

Caryn Negin, Mortgage Agent, Dominion Lending Centres


No question is too small or too big. Email or call - I can help.



The "Bank of Mom and Dad" - What Now?

Many parents are helping their adult children buy their first homes. However it’s important that parents think carefully about their own future needs, before opening the doors to the “the Bank of Mom and Dad,”.

First time home buyers are usually in need of this type of assistance from their parents, adding to (topping-up)  the down payment. The new "Mortgage Stress Test" will likely make this scenario a lot more common. The Real Estate Industry is lobbying to allow parents to dip into their RRSP's to help their children purchase a home. Plus, allowing buyers to access their RRSP's more than the legislated one time. The industry also wants to increase the maximum allowable borrowing amount by $10,000. 

Mortgage insurance has become a lot more expensive too so there is a lot of incentive to get past that 20% down payment. Anything less than 20% results in more than an 80% mortgage which is subject to mortgage insurance on top of the mortgage itself. For some parents its easily affordable but for others it poses a challenge to come up with this.  But it shouldn't be at the risk of using all the parent(s)' savings.

Some parents even consider going into debt to help their children into their first home but is this really practical? When it comes to families, many parents dont want to disappoint their children  - so it becomes an emotional decision  to leave a financial investment legacy to their children while they can live to enjoy it with them.  With the extremely high cost of housing, adult children often just can’t buy a home without some assistance, however it’s critical to balance this together with what their parents need.

There are other questions parents need to ask themselves before delving into the "Bank of Mom and Dad"  Will they outlive their money? What about inflation's impact? Do they have enough set aside to cover their own medical costs associated with debilitating health or long-term care? 


Parental financial help is often a gift but would it be better to structure it in the form of a loan in case there are unforeseen retirement costs?  If parents become truly comfortable, that they have enough life-time assets, they can always forgive the loan down the road. 

Despite the high prices, interest rates are still so low that this is an encouragement for parents to assist their children. Today, half of a mortgage payment goes towards paying the interest and half goes towards the principal whereas not too many years ago it wasn't such an equal ratio in favour of that principal. 

When mixing family and money, emotions can run high, so it’s important to clearly define everything along with sage financial advice. Some parents are even selling investments or changing their own home ownership status to free up funds to help their children. Its crucial to figure out that this wont impact their own quality of life. Plus, homeownership comes with large financial responsibilities - are their children really ready for them?

Parents should think about putting terms and conditions in writing whether it’s a gift or a loan. It’s just wise protection for both sides of the investment. There can be more than one child in the family.  Or what will happen to their investment should there be a divorce or other unforeseen challenges?

Other considerations?  If a parent gives cash, is that gift an advance on that child’s inheritance? If its a loan, will that loan be forgiven on the parent(s) passing, or would it be deducted against what the child will receive from the estate?” These are very important answers to know ahead of time.

It’s wonderful when parents want to and can help their adult children purchase a home, however family discussions to disclose and review all this planning can save many financial misunderstandings and emotional heartache down the road.

Did you know there are 2 different kinds of Mortgage Pre-Approvals?

No, you haven’t read the title incorrectly. 

The phrase “Mortgage Pre-Approval” has 2 distinct, different meanings. I always want you to have a preliminary Mortgage Pre-Approval before we look for a residential home for you to purchase. This 1st type of pre-approval, is really a personal financial pre-approval (not on a specific property), based on your income, asset to debt ratio, credit history and report, amount of your anticipated down payment and other criteria. This kind of pre-approval is determined by your credit worthiness and how much of a mortgage the financial institution is willing to give you. And once all this is determined, only then can you know what interest rate you ‘qualify’ for. Plus, then we know how much we can actually spend to purchase a residential home: the total of the amount of the allowable mortgage plus the amount of your down payment. 

Securing this 1st Mortgage Pre-Approval for your purchase gives you a 90 day locked-in mortgage rate. If mortgage rates go down, you'll receive the benefit of the lower rate. If mortgage rates increase, your rate will remain the same as your already approved rate. Your mortgage rate won't go up during the 90 day locked-in period. If you want to purchase a home within the next 90 days, and with mortgage rates having just come down, NOW is the time to get your pre-approval and lock-it in. You can initiate discussions with your own financial institution which may or may not offer you the lowest interest rate out there or you can work with one of my trusted Mortgage Brokers who actually has the financial institutions/banks bid for your individual business with the lowest possible mortgage rate available. This 1st Mortgage Pre-Approval is the initial major step towards buying a home or we could be out there blindly looking at real estate properties that are too expensive for us. Or perhaps we have greater buying power than we thought we did. Of course, we don't have to spend the highest amount you're approved for - I always want to find you the most real estate value for the least amount of money. But, the way prices are so high right now, we have to figure out what's really financially in your comfort zone. It's not 'just' a mortgage payment you're committing to, we need to take into account your land transfer fees, moving costs, legal costs plus ongoing home maintenance, property taxes, and utility costs to name a few.

Now for the 2nd Mortgage Pre-Approval. This is approval for a specific property and takes place when you’ve found the residential home you want to purchase, we've made the offer and it’s been accepted by the Seller. Whenever possible, for your benefit, I include a Financing Condition in our Offer. This condition states that we have a certain number of days (usually 3 or 4) to ensure that we can get the required amount of mortgage for the particular home that we've just purchased. During these 3 or 4 days, your financial institution will (most of the time) conduct an appraisal of the home you’ve just bought, to ensure that it’s really worth what we’ve agreed to pay for it.  And in all years as a Realtor I've  never had a financial institution tell one of our clients that the residential home they’ve just purchased isn’t worth the amount they’re spending. Why, you ask? It’s because I am absolutely diligent in advising you if you’re offering more than the property is truly worth.  I always want that appraisal to agree with our purchase price.  Once the bank appraisal has come back with a positive report that, indeed, at this purchase price, you will get the mortgage you were approved for in the 1st Mortgage Pre-Approval, we can waive the financing condition towards firming up the purchase of your new home.

One phrase:  “Mortgage Pre-Approval” – 2 different meanings/scenarios. If you’d like even more of a detailed explanation or further information just give me a call. I'm always happy to share, with you, as much information as I can. And no real estate question is too small or too large!

Will The Public Be Able to Access Toronto's "Sold' Data?

It's definitely going to be a while.

Currently the general public can’t access Toronto's past home sale prices without the help of a Realtor. For privacy, it's controlled by the Toronto Real Estate Board (TREB). But that might very well be changing.

A 2016 Federal Court ruling which ordered TREB to end its strict controls on some housing data has recently been upheld, despite an appeal. Canada’s competition commissioner had argued that TREB’s practices were stifling competition and innovation. But TREB will now appeal to the Supreme Court to reverse that decision.

The database of the Multiple Listing Service (or MLS) is run by the Canadian Real Estate Association. Anyone has access to the list prices and addresses of homes currently for sale on   Realtors, though, can share with their clients, a more comprehensive version of these listings including historical sales and the most recent ones, as well as homes that never sold.

Realtors have respected the privacy of home owners by only sharing this information privately. So, anyone who is not working with an agent, can’t acces this data. The Competition Commission argued that this ties the hands of agents who want to market this private information to consumers. In 2016, Canada’s Competition Tribunal agreed and decidede that TREB can’t prevent agents from sharing sale data on their own websites.

The benefit?  Realtors can advise clients when prices were reduced in their desired neighbourhoods, track the number of homes selling above or below the list price, and offer faster property valuations. Consumers could use the information to determine the current value of a home they wanted to buy, without needing to ask a realtor directly for help.

TREB argued that allowing such free access to this data violates privacy and copyright legislation. But the Court of Appeal continues to maintain that TREB’s restrictions were intended mainly to hold onto a competitive advantage for its own Realtors, by creating a market where they’re the best resource of past/current, accurate home sales.

TREB is now appealing to the Supreme Court which may or may not be allowed. And until a final Supreme Court ruling, TREB will block the release of any data and it will definitely take many, many months to determine. Now, the national industry behemoth, the Canadian Real Estate Association, has intervened signaling that there could be grave national consequences.




Our Market is Recovering But....

Toronto Real Estate Board President Tim Syrianos announced that Greater Toronto Area REALTORS® reported 7,374 transactions through TREB's MLS® System in November 2017. This result was up compared to October 2017, bucking the regular seasonal trend. On a year-over-year basis, sales were down by 13.3 per cent compared to November 2016.

New listings entered into TREB's MLS® System in November 2017 amounted to 14,349 – up by 37.2 per cent compared to November 2016, when the supply of listings was very low from a historic perspective.

"We have seen an uptick in demand for ownership housing in the GTA this fall, over and above the regular seasonal trend. Similar to the Greater Vancouver experience, the impact of the Ontario Fair Housing Plan and particularly the foreign buyer tax may be starting to wane. On top of this, it is also possible that the upcoming changes to mortgage lending guidelines, which come into effect in January, have prompted some households to speed up their home buying decision," said Mr. Syrianos.

The MLS® Home Price Index (HPI) composite benchmark price was up by 8.4 per cent on a year-over-year basis in November 2017. The average selling price for all home types combined was down by two per cent compared to November 2016, due in large part to a smaller share of detached home sales versus last year. On a year-to-date basis, the average selling price was up by 13.4 per cent compared to the same period last year. High density home types continued to lead the way in terms of price growth, with the average condominium apartment price up by double-digits compared to November 2016.

"Changes in market conditions have not been uniform across market segments. In line with insights from consumer polling undertaken by Ipsos in the spring, we are still seeing seller's market conditions for townhouses and condominium apartments in many neighbourhoods versus more balanced market conditions for detached and semi-detached houses. We will have more insights to share about consumer intentions for 2018 at the end of January when TREB releases its third annual Market Year in Review and Outlook report," said Jason Mercer, TREB's Director of Market Analysis.

What Ontario's New Foreign Investment Tax Means.


Legally known as the Non-Resident Speculation Tax (NRST), this new tax is 15% on the purchase or acquisition of an interest in a Residential (only) property in the Greater Golden Horseshoe by individauls who aren't Canadian citizens or permanent Canadian residents. It is also applies to foreign corporations and taxable trustees. This NRST tax is in addition to the Ontario Land Transfer Tax. and, in Toronto, the Toronto Land Transfer Tax.  The legislation,is retroactive to April 21, 2017 however binding agreements of Purchase & Sale signed prior to April 21, 2017 are exempt.

This tax includes the purchase of single family residences, detached, semi-detached, townhouses and condominium units, duplexes, triplexes, fiveplexes and sixplexes. It does not pertain to multi-residential rental apartment buildings with over 6 units, agricultural, commerical or industrial land. 

Even if only one of the Buyers or Transferees is a Foreign entity, the NRST payable applies to 100% of the value of the consideraiton for the purchase or transfer. 

The NRST doesn't apply when a person purchases or acquires a residential property as a 'Trustee' of a mutual fund trust, real estate investment trust or specified investment flow-through trust.


The NRST can be exempt to a foreign national who receives confirmation under the Ontario Immigrant Nominee Program, as long as they are confirmed under the program at the time of the purchase or acquisition. It can also be exempt for those who are conferred with the status of "Convention Refugee" or "Person In Need Of Protection" (Refugee).  Another exemption can be if a foreign national has a spouse who is a Canadian citizen, permanent Canadian resident or a 'nominee' or 'refugee'. However the exemption doesn't apply if there are more than the foreign national and the spouse on title. 


A  Rebate can occur if:

  •  within 4 years of the date of purchase/acquisition the foreign national becomes a Canadian citizen or permanent Canadian resident or
  • the foreign national is a full time student for at least the last 2 years from the date of purchase/acquisition in an 'approved institution' as per the Ministry of training, Colleges and Universities or
  • the foreign national has legally worked full time in Ontario continuously for 1 year since the date of purchase/acquisition.    

To be eligible, the foreign national must hold property ONLY with his/her spouse and be used as their principal residence for the time period. 

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Inventory Up, But Sales Down. Yet Prices Are Still Increasing.

Toronto's 2017 May/June market is very interesting: "Inventory" for sale is up (as is every spring); "sales" are down (more for buyers to choose from) yet prices have still increased year over year. There's no real reason for the slowdown in the number of properties sold. It's a 'healthy adjustment that isn't triggered by anything'. The interest rate hasn't changed/increased, and we're not in a recession. So the question is "Why?"

Home sales in Toronto dropped to 10,196 in May, down 20.3 per cent from last year with detached home sales leading the decline at 26.3 per cent.

However, supply for sale, saw a 42.9 per cent jump from 2016. Condo inventory though was lower year-over-year, and remains tight. .

“Home buyers definitely benefitted from a better supplied market in May, both in comparison to the same time last year and to the first four months of 2017,” said Toronto Real Estate Board president Larry Cerqua.

“However, even with the robust increase in active listings, inventory levels remain low. At the end of May, we had less than two months of inventory. This is why we continued to see very strong annual rates of price growth, albeit lower than the peak growth rates earlier this year,” he added.

CIBC chief economist Benjamin Tal indicates that market conditions were already changing before the introduction of Premier Wynn's Fair Housing Plan.

“I think that is exactly what the doctor prescribed – what we need is a slowdown that is not triggered by anything,” Mr. Tal told The Globe and Mail, adding that the adjustment is healthy. He added that there is not an interest rate spike or recession that could see a crash. 

According to TREB’s HPI benchmark index prices were up 29% year-over-year  The average selling price increased by 14 per cent across the whole area to $863,910.

Everyone is asking whether Wynn's Ontario Fair Housing Plan has had an impact on sales in Toronto. TREB’s director of market analysis Jason Mercer comments cautiously:

“The actual, or normalized, effect of the Ontario Fair Housing Plan remains to be seen. In the past, some housing policy changes have initially led to an overreaction on the part of homeowners and buyers, which later balanced out,” he says.

He adds that the jump in active listings appears to be homeowners taking advantage of higher prices, having delayed selling, perhaps because they still expected prices to rise.


You DO Need a Realtor When Buying Pre-Construction Condos & Homes !

Not having your own Real Estate Agent to perform due diligence could land you in a horrible situation and losing thousands of dollars.

You may have heard about two recent condo projects in downtown Toronto having been converted into ‘rentals’ with 181 innocent buyers of a  complex on King St. West, near Liberty Village, out as much as $40,000 each.  Another condo project,  “The Selby”, at Sherbourne and Bloor, abandoned their plans, as well.

As your Realtor, I look to discover information not disclosed or made available when you walk into a developer’s Open House Site Office promoting their brand new spectacular, out of this world, absolutely astounding new construction condo.  If, unfortunately, you don’t know the questions to ask, they’re not obliged to say anything. And more often than not, the sales people hired by the developer, to ‘sell’  have no clue either.  

I’ve represented many of my clients who are either buying new construction to live in or invest/flip out. With my indepth knowledge and many years of experience ,I delve into the deep corners of what’s really going on behind the scenes. I don’t want you to have the kind of experience these unsuspecting purchasers have had.

As one recent example, I accompanied my Clients to an exclusive luxury townhouse project they were interested in. As I always do, I asked the on-site Representative many questions. The answers I got, or rather didn't get, were concerning. The Developer's Representative could not give me definitive responses on anything. While my Buyers were excited about the prospect of what the house was going to 'look like', my professional intution told me to advise them to very wary. The deposit structure was out of proportion to what a fully funded project would require and, for 4 years, would tie up more of my Buyer's money than what should have been necessary. After we left, I explained my concerns, and I was grateful that they heeded my advice. Within 5 months, the project went under and was abandoned. The deposits of other unsuspecting Buyers, to date, has not been returned.   

If you’re thinking of taking a walk down ‘new construction aisle - whether condo or freehold", please call and let me help you - so you don't end up taking a negative & losing walk on the wild side.   

Save Money: Pay Down Your Mortgage


Today’s interest rates are still at an all-time low, which gives you several great opportunities. For current homeowners, paying down mortgage debt is more beneficial than ever with the low interest rates we are continuing to enjoy.  My advice to homeowners is to take advantage of paying down 'the principal' of your mortgage, which can be up to 20% twice a year depending on how the mortgage is structured.  

Another option to consider is to refinance your current mortgage to take advantage of the current low interest climate. Sometimes paying the penalty to refinance an existing mortgage can be offset over the long term by refinancing and it actually saves you money. I recommend  reaping the monetary rewards earned by paying down principal mortgage debt or refinancing an existing mortgage.  I work closely with mortgage brokers who help keep my clients in the loop and updated about any opportunities as they arise or are on the horizon.

For those looking to break into the real estate market, now is the time to invest in a residential home or condo, especially if the predictions by the financial institutions and economists are correct. First time buyers should consider purchasing a home or condo now to take advantage of these low interest rates. Sales are at an all time high with so little inventory and so many buyers. Because of low supply and huge demand, housing prices continue to climb, and the low interest rates currently offered will help with affordability and financing options. 

Many Canadians took on short and long term mortgages when the Bank of Canada changed its overnight lending rate nearly 7 years ago.  With some five-year fixed mortgages at 2.39%, it can be a hard selling point to convince homeowners to pay down debt.  But I strongly believe that it is financially astute to consider topping up your payment, even by a small amount, which can take years off your mortgage and save you thousands of dollars in interest.

It's Critical to Increase Your Property and Contents Insurance

So often, once we bought our home or have lived in it for a long time, we neglect to continuously take stock of what's inside.  Our  property/building insurance is in place but the value has increased, and we accumulate small and large valuable items that require protection too.

When was the last time you thought about the increased value of your property and what’s inside your home?

First, I advise ensuring that your real estate property (the building) insurance is at current market value –a fire or a flood (pipes bursting) could destroy your beloved home. It's very easy for me to provide you with a complimentary Letter of Opinion documenting this market value for insurance purposes.

Secondly, and, of course, and I wouldn’t wish this on anyone, but home theft victims discover too late that their real estate contents insurance doesn’t cover replacement cost of their jewelry, electronics, furniture, appliances, heirlooms, artwork etc. And again, if there’s a fire or a flood so many of your treasures could be lost.

I know that we underestimate what we’ve accumulated over the years. So I'm asking you to do a comprehensive inventory update. Then, talk with your insurance broker to increase the insurance value of these items, by way of a rider, on your policy.  Most insurance policies allow up to a certain amount for jewelry, art, & furs coverage however over a specific amount certified appraisals are required.

Actually, insurance companies believe that an overhaul is important every 3 years to review any purchases, inheritances, upgrades that require higher coverage. Safety deposit boxes are often very helpful but accessing them every time you want to wear that piece of jewelry might be a little difficult and time consuming.

Please also review your old and then updated policies with your insurance provider so you understand whether you have critical replacement value. Cataloguing your valuables and possessions with photos also makes it much easier for a claim, if you ever need to make one.

Residential homes, inside and out, need the right insurance on an ongoing basis. My goal is always to give you investment peace of mind now and for the future.