On October 15, 2017, the Superintendent of Financial Institutions (OSFI) announced changes to the Canadian mortgage lending policies. These changes take effect as of January 1, 2018. Of particular importance is the policy change that will require all uninsured mortgage borrowers to go through a “stress test” prior to approval. An uninsured mortgage have at least 20% or more for a down payment.
Guideline B-20 now requires the minimum qualifying rate for uninsured mortgages to be the greater of the five-year benchmark rate published by the Bank of Canada or the contractual mortgage rate +2%.
To help you navigate through the policy change, here’s some basic FAQ’s.
FAQ’s – OSFI Mortgage Lending Policies Change
1) Will the rule changes affect a buyer’s current purchase and mortgage already approved with a bank/lender that is set to close after December 31st, 2017?
No, it will not affect your purchase. Banks/lenders will honour and close on all deals already approved and closing within the regular parameters. E.g. A buyer’s signs a purchase agreement dated November 1, 2017 with a set closing date of January 25, 2018. The new rules will not impact this buyer.
2) Will the rule changes affect a buyer’s current pre-approval that is already in place with a bank/lender if they do not have an accepted offer on a new home by December 31, 2017?
If a buyer does not have an accepted offer dated before January 1st, 2018, they will need to re-qualify under the new guidelines?
3) Do the new rules affect a buyer wishing to just renew their mortgage with their existing bank/lender?
No. If a buyer does not require an increase their mortgage (i.e. a “refinance”) and just want to renew their mortgage, the new rules will not impact their ability to do so.
4) Do the rule changes affect a buyer’s ability to increase their current mortgage (i.e. a “refinance”)?
Yes. Any change to a buyer’s mortgage will require them to qualify under the new rules.
5) Does it impact buyers who have less than 20% down (i.e. a “High Ratio” or “CMHC/Genworth” insured mortgages)?
No. These buyers are bound by the rules that were set last year, which requires them to qualify under the Bank of Canada “Stress test” rate of 4.89%.
6) Do these rule changes apply to ALL lending institutions?
No. The rules were put in place for all lending institutions that are federally regulated and governed (all banks and trust companies). There are some provincially governed institutions (e.g credit unions). While credit unions are not federally regulated, it is likely they will adopt the new rules. As a result, while they are not required to do so, it is likely they will.
If you are thinking about making a move we highly encourage you to speak with your mortgage provider for further details. If you do not have a mortgage specialist, contact us and we will be happy to make a couple of recommendations.
For more information visit the OSFI press release: http://www.osfi-bsif.gc.ca/Eng/osfi-bsif/med/Pages/B20_dft_nr.aspx
Article is curtesy of: Glenn MacLaren | Mortgage Broker/Managing Partner | Tribe Financial Group – October 18, 2017