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.

Not bad for 4 years worth of work. Now the OSFI (Office of the Superintendent of Financial Institutions) changes begin with the B-20 and B-21 Legislation. This occurred between fall 2012 and spring 2013.

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%.

All these changes. How did it affect consumers? It made buying a home and qualifying for a mortgage way more difficult, it has affected purchasing power by about 45% from pre-2008 up until today.

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

Peter Paley.