OSFI – The Office of the Superintendent of Financial Institutions – has implemented 3 new mortgage rule changes starting January 1, 2018


Qualifying rate stress test to all uninsured mortgages

Uninsured mortgage consumers must now qualify using a new minimum qualifying rate. The rate will be the greater of the five-year benchmark rate published by the Bank of Canada OR the lender contractual mortgage rate +2.0%.

How does this affect the mortgage consumer with a down payment or equity of 20% or more?
The biggest impact will be on the amount for which the home buyer/owner will be able to qualify for. Previously, the home buyer/owner qualified at the contract rate offered by the lender. While the actual mortgage payment will still be paid at the contract rate, a higher calculation will be used for qualification purposes.

Here is an example:

Mortgage Amount $400,000          If Your Contract Rate is 3.44%       Qualifying Rate 5.44% (3.44% + 2%)

Monthly Payment                              $1,985.00                                            $2,427.00

Minimum Income                               $70,000                                                $85,000

Does the option to refinance my home remain?
Yes, home owners will still have the ability to refinance up to 80% of the value of their property however, they will have to pass the same stress test which is the higher of the BoC five-year benchmark rate (currently 4.89%) OR the contract rate from the lender plus 2%.


Lenders will be required to enhance their loan-to-value (LTV) measurement and limits to ensure risk responsiveness

Mortgage lenders (excluding credit unions and private lenders) must establish and adhere to appropriate LTV ratio limits that are reflective of risk and updated as housing markets and the economic environment evolves. There are more details on this policy from lenders to follow.

What does this mean?
OSFI directs lenders (excluding credit unions and private lenders) to have internal risk management protocols in higher priced markets (sometimes called “hot real estate markets” like Toronto and Vancouver). This is a continuation of a policy already in place. Many mortgage lenders have been following the principles of the policy for the last 10 to 12 months.


Restrictions will be placed on certain lending arrangements that are designed, or appear designed to avoid LTV limits

Mortgage lenders (excluding credit unions and private lenders) are prohibited from arranging with another lender: a mortgage or a combination of a mortgage and other lending products, in any form that circumvents the institution’s maximum LTV ratio or other limits in its residential mortgage underwriting policy, or any requirements established by law. This is often referred to as “bundling” or “bundle partnership”.

What does this mean for consumers?
An example: if a consumer applies for a mortgage with an 80% LTV and the lender can only approve 65%. The lender then partners with a second lender for the additional 15%. The original lender can then “bundle” the 15% LTV mortgage with the original 65% mortgage to form the complete 80% LTV loan. This will no longer be permitted as per OSFI.

Simplifying how the new mortgage rules affect borrowers starting January 2018

Please note the following chart is for illustration purposes only.  It is based on a 30 year amortization, 20% down payment with a 5 year term, with a 3.5 or 5.5 qualifying rate in January 2018.

Refinances: Maximum Allowable Amount

Household Income     Maximum Refinance Price     Maximum Refinance Price

TODAY                                       JANUARY 2018

$80,000                                  $580,000                                         $460,000

$100,000                                $724,000                                          $576,000

$150,000                                 $1,088,000                                       $864,000

$200,000                                $1,440,000                                       $1,152,000

Purchases with 20% down payment: Maximum allowable amount

Household Income     Maximum Refinance Price     Maximum Refinance Price

TODAY                             JANUARY 2018

$80,000                                    $725,000                                 $575,000

$100,000                                    $905,000                                $720,000

$150,000                                    $1,360,000                             $1,080,000

$200,000                                   $1,800,000                             $1,440,000

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