Further Tightening of the Mortgage Belt

Marci • September 22, 2016

Before reading this you should be warned that the following content is pretty dry… like eating 8 saltine crackers without drinking water dry. If you need to go and get something to drink before proceeding, no worries, we will wait here. Take your time. 

The quick and dirty version, as of November 1st 2016, OSFI is going to require banks to have more money on hand to protect them in case the Canadian economy decides to ride a shark with 200 pounds of dynamite strapped to it’s chest into the mouth of an active volcano. This means two things, banks will probably slowly increase rates to cover their costs and secondly you will probably see mortgage qualification tighten a little further. 

Here is all you need to know on the subject, sourced from a few different places online. 

OSFI

On September 9th, The Office of the Superintendent of Financial Institutions (OSFI) released for public consultation, revisions to its Capital Adequacy Requirements Guideline (CAR). The following is the official release:

OSFI’s CAR Guideline provides a framework for assessing the capital adequacy of federally regulated deposit-taking institutions and is updated periodically to ensure that capital requirements continue to reflect underlying risks and developments in the financial industry.

The CAR Guideline is based on requirements agreed by the Basel Committee on Banking Supervision. As a member of the Basel Committee, OSFI supports and applies the global risk-based framework to its regulated institutions through a measured and tailored approach that is suited to the Canadian context.

Captured in this set of revisions are OSFI’s expectations on the domestic implementation of two global capital adequacy standards issued by the Basel Committee in recent years. In this draft, OSFI outlines its discretionary approach to the implementation of the Basel III countercyclical buffer regime in Canada as well as provides guidance on the application of Basel’s equity investment in funds rules, which require institutions to hold adequate capital against equity investments in funds.

To reflect the changing risks in the Canadian mortgage market, the draft CAR Guideline has also been updated to include planned revisions to the treatment of insured residential mortgages (see OSFI’s December 2015 letter to industry ). Through the capital framework, OSFI is clarifying the conditions under which risk mitigation benefits of mortgage insurance are recognized for regulatory capital purposes. These changes aim to reinforce the need for banks to exercise prudent underwriting and proper due diligence when originating insured mortgages.

Finally, the revisions to the draft guideline provide clarification on how OSFI’s capital framework will apply to federal credit unions.

Quick Facts

  • The implementation date for these changes is set for November 1, 2016 for institutions with an October 31 year end, and January 1, 2017 for institutions with a December 31 year end.
  • OSFI is inviting comments on the proposed updates, which it will consider during the development of the final version of the guideline. The deadline for submitting comments is October 18, 2016.
  • A non-attributed summary of industry comments received along with OSFI’s responses will be posted on OSFI’s website when the final version of the guideline is released.

Associated Links

About OSFI

The Office of the Superintendent of Financial Institutions (OSFI) is an independent agency of the Government of Canada, established in 1987, to protect depositors, policyholders, financial institution creditors and pension plan members, while allowing financial institutions to compete and take reasonable risks.

Canadian Mortgage Trends

As most people don’t care to read straight government correspondence, Canadian Mortgage Trends, a publication of Mortgage Professionals Canada published an article summarizing the Capital Adequacy Requirements.

“Under the proposed revised guideline, the amount of capital required to be held by the institutions is not expected to change significantly,” assured a spokesperson. “These changes aim to ensure that capital requirements continue to reflect underlying risks and developments in the financial industry.”

The article goes on to describe an interesting change called a “countercyclical buffer”… if that doesn’t spin you around on your chair, nothing will! Hot stuff! Anyway…

Money Sense Magazine

Not one to miss a chance at a sensational headline, Money Sense Magazine published an article called “Expect tougher mortgage rules by November”. The article goes on to outline the following:

  • Hot markets prompt tougher rules for banks
  • Taxpayer will be less exposed
  • How it will impact the Canadian home buyer
  • When will tougher rules take affect?

Let’s Talk

If you are considering buying a property in the next couple of years, or have a mortgage that you would either like to renew or refinance, please don’t hesitate to contact me anytime. I would love to discuss what is going on in the economy and help you determine if now is a good time for you to make a move. 

Let’s talk, I’m always available to you! 

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RRSP As A Downpayment

By Marci Deane • May 14, 2025
Did you know there’s a program that allows you to use your RRSP to help come up with your downpayment to buy a home? It’s called the Home Buyer’s Plan (or HBP for short), and it’s made possible by the government of Canada. While the program is pretty straightforward, there are a few things you need to know. Your first home (with some exceptions) To qualify, you need to be buying your first home. However, when you look into the fine print, you find that technically, you must not have owned a home in the last four years or have lived in a house that your spouse owned in the previous four years. Another exception is for those with a disability or those helping someone with a disability. In this case, you can withdraw from an RRSP for a home purchase at any time. You have to pay back the RRSP You have 15 years to pay back the RRSP, and you start the second year after the withdrawal. While you won’t pay any tax on this particular withdrawal, it does come with some conditions. You’ll have to pay back the total amount you withdrew over 15 years. The CRA will send you an HBP Statement of Account every year to advise how much you owe the RRSP that year. Your repayments will not count as contributions as you’ve already received the tax break from those funds. Access to funds The funds you withdraw from the RRSP must have been there for at least 90 days. You can still technically withdraw the money from your RRSP and use it for your down-payment, but it won’t be tax-deductible and won’t be part of the HBP. You can access up to $35,000 individually or $70,00 per couple through the HBP. Please connect anytime if you’d like to know more about the HBP and how it could work for you as you plan your downpayment. It would be a pleasure to work with you.

Selling Your Property? Let's Talk

By Marci Deane • May 7, 2025
If you’ve been thinking about selling your existing property, for whatever reason, it would be in your best interest to connect with an independent mortgage professional before calling your real estate agent or listing it yourself. And while talking with your mortgage professional might not sound like the most logical place to start, here are a few scenarios that explain why it makes the most sense. If you’re buying a new property If you’re selling your property, chances are, you’ll have to move somewhere! So, if you plan on buying a new property using the equity from the sale of your existing property, chances are you’ll need a new mortgage. Don’t assume that just because you’ve secured mortgage financing before, that you’ll qualify again. Mortgage rules are constantly changing; make sure you have a pre-approval in place before you list your property. Also, by connecting with a mortgage professional first, you can look into your existing mortgage terms. You might be able to port your mortgage instead of getting a new one, which could save you some money. If you’re not buying a new property Even if you aren’t buying a new property and want to sell your existing property, it’s still a good idea to connect with a mortgage professional first, as we can look at the cost of breaking your mortgage together. Unless you have an open mortgage, or a line of credit, there will be a penalty to break your mortgage. The goal is to work on a plan to minimize your penalty. Because of how mortgage penalties work, sometimes it’s just a matter of waiting a few months to save thousands. You'll never know unless you take a look at the details. Marital breakdown The simple truth is that marriages break down. When that happens, often, people want closure, and unfortunately, they make decisions without really thinking them through or seeing the full picture. So, instead of simply selling the family home because that feels like the only option, please know that special programs exist that allow one party to buy out the former spouse. The key here is to have a legal separation agreement is in place. If you’d like to discuss the sale of your property and your plans for the future, connect anytime. It would be a pleasure to work with you!

Options For Your Downpayment

By Marci Deane • April 30, 2025
Your downpayment refers to the initial payment you make when buying a property through mortgage financing. A downpayment is always required when purchasing, because in Canada, lenders are only allowed to lend up to 95% of the property value, leaving you with the need to come up with at least 5% for a downpayment. In fact, securing mortgage financing with anything less than 20% down is only made possible through mortgage default insurance. Canada has three default insurance providers: the Canadian Mortgage and Housing Corporation (CMHC), Sagen (formerly Genworth Canada), and Canada Guaranty. There is a cost for default insurance which is usually rolled into the total mortgage amount and is tiered depending on how much you put down. As your downpayment can be a significant amount of money, you probably need a plan to put this money together. So, let’s take a look at some of the options you have to come up with a downpayment. Money from your resources If you’ve been saving money and have accumulated the funds and set them aside for to use for your downpayment, you'll need to prove a 90-day history of those funds. As far as the lender is concerned, this is the most straightforward way to prove a downpayment. Any large deposits to your bank account that aren’t from payroll will require you to prove the source of funds. For example, if you recently sold a vehicle, you’ll need to provide the paperwork as proof of ownership, which corresponds to your account’s deposit. Or, if you have funds in an investment account that you’ve transferred over, statements of that transfer or account would suffice. You have to prove the source of your downpayment funds to the lender when qualifying for a mortgage to help prevent money laundering. Funds from the sale of another property If you’ve recently sold a property and you’re using the proceeds of that sale as the downpayment from your new purchase, you can provide the paperwork from that transaction to substantiate your downpayment. RRSPs through the Home Buyer’s Plan Okay, so let’s say you don’t have all the money set aside in your savings, but you do have cash in your RRSP. Assuming you’re a first-time homebuyer, you can access the funds from your RRSP Tax-Free to use as a downpayment. You’re able to access up to $35k individually or $70k as a couple. The money has to be paid back over the next 15 years. If you’d like more information on what this program looks like, please get in touch. Gifted downpayment Now, if you don’t have enough money in your savings, but you have a family member who is willing to help, they can gift you funds for your downpayment. With the increased cost of living, making it harder to save for a downpayment, receiving a gift from a family member is becoming increasingly commonplace. Now, to qualify, the gift has to come from an immediate family member who will sign a gift letter indicating there is no schedule of repayment and that the gift doesn’t have to be repaid. Proof that the money has been deposited into your account is required through bank statements. Gifted funds can make up part of or the entire amount of downpayment. For example, if you purchase a property for $300k and have $10k saved up, your parents can gift you the remaining $5k to make up the total 5% downpayment. Borrowed downpayment Suppose you aren’t fortunate enough to have a family member who can gift you a downpayment, but you have excellent credit and a high income compared to the amount you’re looking to borrow. In that case, you might qualify to borrow part or all of your downpayment. It’s possible to borrow your downpayment as long as you include the payments in your debt service ratios. Typically this is 3% of the outstanding balance. So there you have it, to qualify for a mortgage, you’ll need to come up with a downpayment. That can be through your resources, a property you sold, an RRSP, a gift from a family member, borrowed funds, or a combination of all five sources. If you’d like to discuss your downpayment or anything else related to mortgage financing; it’s never too early to start the conversation about getting pre-approved for a mortgage. Please connect anytime. It would be a pleasure to work with you!