In 2008, the Federal Government started making some changes to how mortgage applications are approved in Canada. I think it important to recap some of these changes.

Prior to the first rule change:
– No down payment required – finance 100%
– Maximum amortization was 40 years.
– Refinance up to 95% the value of your home.
– With excellent credit scores 680+, you could have a Total Debt Service Ratio (TDSR) of
49%
– Minimum credit score for CMHC was 580

Fall 2008:
– Reduction of maximum amortization from 40 years to 35 years.
– Introduction of a minimum score for Insured mortgages of 620 (But lower scores were
considered on an exception basis).
– 100% financing was eliminated. (However, you could still use a Cash Back Mortgage for
down payment).
– Maximum TDSR lowered to 45%.

Spring 2010:
– Stricter rental property guidelines. The amount of rent for income/debt servicing
purposes was reduced from 80% to 50%.
– A Mortgage Qualifying Rate was introduced for all insured mortgages on all variable
terms and all fixed rate mortgage terms 4 years and less. (5-year fixed rate mortgages
were still allowed to qualify at the contract rate).
– Rental Mortgage down payment minimum was raised from 10% to 20%.
– Insured refinances reduced from 95% Loan to Value to 90%.

Spring 2011:
– Insured Home Equity Lines of Credit discontinued.
– Insured refinances further reduced from 90% Loan to value to 85%
– Maximum amortizations lowered further from 35 years to 30 years.

Summer 2012:
– Implementation of a New Gross Debt Service Ratio maximum of 39%
– Refinance loan to value reduced further from 85% to 80%
– Maximum amortization reduced from 30 years to 25 years for insured mortgages.

OSFI B20 – 2012-2013:
– A new maximum Loan to Value for Home Equity Lines of Credit of 65%, down from 80%.
– The Bank of Canada’s qualifying rate is now applied to all variable and fixed rate
mortgage terms of 4 years or less for conventional mortgages.
– Self-employed borrowers are mandated to provide reasonable income verification. Stated
Income Programs disappear.
– Cashback mortgages are no longer permitted to be used for down payment.

OSFI B21 – Winter 2014:
– Tighter regulations around how to calculate payments on Secured and Home Equity Secured
Lines of Credit.
– All revolving credit payments for debt servicing are now calculated at 3% of the
outstanding balance instead of the interest-only payments. For example, a $10,000 credit
card balance would now have a qualifying payment $300/month up from about $45/month.
Are you feeling a little mad, disappointed or discouraged yet? Now for the greed. For
the next part of this article, remember that default rates in Canada have almost always
been below 0.5%.

Summer 2015:
– Default Mortgage Insurers increase premiums. At a 90.1% – 95% Loan to Value the premium
increased from 3.15% to 3.6%. This cost to consumers would be an additional $1,350 of
default insurance on a $300,000 mortgage.

New Year 2016:
– Increase to the minimum down payments for mortgage amounts between $500,000 and
$999,999.

Fall 2016:
– Mortgage Insurance limited to purchase prices not exceeding $999,999
– Insured refinances were eliminated altogether.
– To avoid the abuse of capital gains exemptions, foreign property owners need to prove
that they are selling a primary residence.
– The mortgage stress test expands to 5-year term mortgages but excluded uninsured
conventional mortgages.

Happy New Year’s 2017:

– Insurers realized revenues are down from all the previous changes and increase premiums
AGAIN! With a 5% down payment, the mortgage insurance premium jumped from 3.6% to a
WHOPPING 4%. This means that you as a homeowner would have a mere 1% equity interest in
your home.

Jan 2018:
Allconventional mortgages will need to qualify with their own stress test or
the contract rate +2.0%. So that means that if the 5-year fixed rate is 3.49%, you
would have to qualify at a rate of 5.49%.

December 2019 – Prime Minister Justin Trudeau orders Finance Minister Bill Morneau to review the stress test as feedback has been negative.  Results remain to be seen.

All these changes. How did they affect consumers? It made buying a home and qualifying for a mortgage way more difficult, it has negatively affected purchasing power by about 45% since 2008 – Present.  Prior to 2008 a family making $80,000/year with modest consumer debt would qualify for a mortgage of more than $600,000.  Today that same family is reduced to a mortgage amount of approximately $335,000.

If you are looking for a mortgage professional I would be happy to help you.

Peter Paley, Derek Vandall and Colten Boudreau