Tricky changes to the mortge rules

Here is one of the changes of the mortgage rules that is now in effect – called the B21 Rules.

It will be sure to cause surprise for some customers that have large Line of Credits – LOCs

How the banks are now calculating monthly payments for secured lines of credit:

  • The outstanding balance (not the limit) will now be amortized over 25 years using the Bank of Canada 5-year benchmark rate to determine the monthly payment

What that means …

For the calculation of your QUALFYING INCOME – as in, the way the government says your mortgage math is done – your total balance on your LOC is now treated:

  • as a mortgage
  • with a 25 year amortization and
  • the rate used to calculate the monthly payment is the government’s “benchmark rate” which is about 5%.

This number is now used as your payment, not what the payment actually is.

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