Qualifying interest rate
Direct from CMHC:
On March 5, 2010, CMHC communicated to Broker organizations and CMHC-approved Lenders how the “five-year fixed rate” requirement would be implemented by CMHC.
Effective April 19, 2010, the qualifying interest rate used to assess borrower eligibility will change only for loans with a loan to value ratio (LTV) greater than 80 per cent as follows:
Fixed Rate Mortgages and Variable Rate Mortgages: For loans with a fixed rate term of less than 5 years and for all variable rate mortgages, regardless of the term, the qualifying interest rate is the greater of the benchmark rate, and the contract interest rate. For loans with a fixed rate term of 5 years or more, the qualifying interest rate is the contract interest rate.
Mortgages with Multiple Interest Rates (e.g. Multi-Component Mortgages): Each component must be qualified using the applicable criteria defined above.
The “Benchmark rate” is the typical 5-year fixed posted rate of the Big 5 Banks.
PLEASE NOTE: These regulations are required for financing greater than 80% of the value/purchase price. For clients borrowing less than 80% LVR, each lender has their own set of policies for qualification. Some lenders will use what the current real rate is (usually lower than the qualifying rate) and some will stick with the above policies. Please contact us with any questions on your specific situation and we’ll walk you through which policy/lender you’re dealing with.
Please click here to view Historical rate charts for both fixed and variable rates.