What you Need to Know About the Latest Mortgage Rule Changes

Marci • October 17, 2017

If you’ve tuned into the news today, you’ve probably heard that there are new mortgage rules coming into effect on January 1st. 2018. Over the next week you’ll most likely hear a lot of commentary on whether these rules are good, bad, necessary, or unnecessary. And no doubt someone somewhere will come to the conclusion that no one will ever get a mortgage again, and that the housing market in Canada is going to come crashing down around us. Please remember that it’s the media’s job to write headlines and attract eyes, so they tend to sensationalize everything. Take what you hear with a grain of salt. Mortgages will still be written, and houses will still be bought.  

At the end of the day, these new rules (outlined below) will come into play, and there’s nothing we can do to change the government’s mind. So how do we respond? Well… as it becomes increasingly difficult to qualify for a mortgage, your goal should be to work with a mortgage professional that gives you more choices. Instead of working with a single institution; having access to a single line of mortgage products, when you work with a mortgage broker, you have access to many different lenders, with a wide variety of choices.

As mortgage rules tighten, your goal should be to find as much flexibility as possible, you do this by working with a mortgage broker. So if you have any questions about your mortgage, please don’t hesitate to contact me anytime , I’d love to have a conversation with you. 

Okay, so on to the changes… the biggest change to the rules surrounding mortgage qualification is that a requirement to stress test each mortgage will be now applied to all borrowers, instead of just borrowers who have less than a 20% downpayment. Qualification for all mortgages will now be made at a minimum qualifying rate which is the greater of  the five-year benchmark rate published by the Bank of Canada or the contractual mortgage rate +2%. 

OSFI (The Office of the Superintendent of Financial Institutions) released their final version of their new guidelines for the mortgage industry. Below is the news release from OSFI. called: OSFI is reinforcing a strong and prudent regulatory regime for residential mortgage underwriting

News Release

For Immediate Release

OTTAWA – October 17, 2017 – Office of the Superintendent of Financial Institutions Canada

Today the Office of the Superintendent of Financial Institutions Canada (OSFI) published the final version of Guideline B-20 −  Residential Mortgage Underwriting Practices and Procedures. The revised Guideline, which comes into effect on January 1, 2018, applies to all federally regulated financial institutions.

The changes to Guideline B-20 reinforce OSFI’s expectation that federally regulated mortgage lenders remain vigilant in their mortgage underwriting practices. The final Guideline focuses on the minimum qualifying rate for uninsured mortgages, expectations around loan-to-value (LTV) frameworks and limits, and restrictions to transactions designed to circumvent those LTV limits.

OSFI is setting a new minimum qualifying rate, or “stress test,” for uninsured mortgages.

  • 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%.

OSFI is requiring lenders to enhance their loan-to-value (LTV) measurement and limits so they will be dynamic and responsive to risk.

  • Under the final Guideline, federally regulated financial institutions must establish and adhere to appropriate LTV ratio limits that are reflective of risk and are updated as housing markets and the economic environment evolve.

OSFI is placing restrictions on certain lending arrangements that are designed, or appear designed to circumvent LTV limits.

  • A federally regulated financial institution is 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.

Quote

“These revisions to Guideline B-20 reinforce a strong and prudent regulatory regime for residential mortgage underwriting in Canada,” said Superintendent Jeremy Rudin.

Quick Facts

  • On July 7, 2017, OSFI published draft revisions to Guideline B-20 –  Residential Mortgage Underwriting Practices and Procedures. The consultation period ended on August 17, 2017.
  • OSFI received more than 200 submissions from federally regulated financial institutions, financial industry associations, other organizations active in the mortgage market, as well as the general public.
  • The cover letter includes an unattributed summary of the comments and an explanation of how these issues were dealt with in the final Guideline B-20.
  • Following publication of Guideline B-20 OSFI plans to assess Guideline B-21 −  Residential Mortgage Insurance Underwriting Practices and Procedures  for consequential amendments. 

Associated Links

About OSFI

The Office of the Superintendent of Financial Institutions  Canada (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.

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Buying a Vacation Property or Rental? Here’s What Lenders Look For

By Marci Deane • October 15, 2025
Owning a vacation home or an investment rental property is a dream for many Canadians. Whether it’s a cottage on the lake for family getaways or a rental unit to generate extra income, real estate can be both a lifestyle choice and a smart financial move. But before you dive in, it’s important to know what lenders look for when financing these types of properties. 1. Down Payment Requirements The biggest difference between buying a primary residence and a vacation or rental property is the down payment. Vacation property (owner-occupied, seasonal, or secondary home): Typically requires at least 5–10% down, depending on the lender and whether the property is winterized and accessible year-round. Rental property: Usually requires a minimum of 20% down. This is because rental income can fluctuate, and lenders want extra security before approving financing. 2. Property Type & Location Not all properties qualify for traditional mortgage financing. Lenders consider: Accessibility : Is the property accessible year-round (roads maintained, utilities available)? Condition : Seasonal or non-winterized cottages may not meet standard lending criteria. Zoning & Use : If it’s a rental, lenders want to ensure it complies with municipal bylaws and zoning regulations. Properties that fall outside these norms may require financing through alternative lenders, often with higher rates but more flexibility. 3. Rental Income Considerations If you’re buying a property with the intent to rent it out, lenders may factor the rental income into your mortgage application. Long-term rentals : Lenders typically accept 50–80% of the expected rental income when calculating your debt-service ratios. Short-term rentals (Airbnb, VRBO, etc.) : Many traditional lenders are cautious about using projected income from short-term rentals. Alternative lenders may be more flexible, depending on the property’s location and your financial profile. 4. Debt-Service Ratios Lenders use your Gross Debt Service (GDS) and Total Debt Service (TDS) ratios to determine if you can handle the mortgage payments alongside your other obligations. With investment or vacation properties, lenders may apply stricter guidelines, especially if your primary residence already carries a large mortgage. 5. Credit & Financial Stability Your credit score, employment history, and overall financial health still matter. Since vacation and rental properties are considered higher risk, lenders want reassurance that you can handle the additional debt—even if rental income fluctuates or the property sits vacant. 6. Insurance Requirements Rental properties often require specialized landlord insurance, and vacation homes may need coverage tailored to seasonal or secondary use. Lenders will want proof of adequate insurance before releasing mortgage funds. The Bottom Line Buying a vacation property or rental can be exciting, but financing these purchases comes with extra rules and considerations. From higher down payments to stricter property requirements, lenders want to be confident that you can handle the responsibility. If you’re considering a second property, the best step is to work with a mortgage professional who can compare lender requirements, outline your options, and find the financing that works best for you. Thinking about making your dream of a vacation or rental property a reality? Connect with us today.

What to Expect in the Closing Process: A Step-by-Step Guide

By Marci Deane • October 8, 2025
You’ve found the right home, your offer’s been accepted, and your financing is approved—congratulations! But before you can pick up the keys and celebrate, there’s one more important stage: the closing process. Closing is the final step in your homebuying journey, where all the paperwork, legal details, and financial transactions come together. It can feel overwhelming if you don’t know what to expect, but with the right preparation, closing can be smooth and stress-free. Here’s a step-by-step guide to help you understand the process. Step 1: Hire a Lawyer or Notary A real estate lawyer (or notary, depending on your province) handles the legal side of closing. They will: Review the purchase agreement and mortgage documents Conduct a title search to confirm the seller has the legal right to sell the property Ensure the mortgage lender is properly registered on the title Handle the transfer of funds between you, the lender, and the seller Your lawyer or notary will be your main point of contact during closing, so choose one you trust and who communicates clearly. Step 2: Finalize Your Mortgage Your lender will send the mortgage instructions directly to your lawyer or notary. At this stage: You’ll provide proof of property insurance (lenders require this before releasing funds) You’ll confirm your down payment and closing costs are available in your lawyer’s trust account The lawyer will prepare all documents for your review and signature Step 3: Pay Closing Costs Closing costs typically range from 1.5% to 4% of the purchase price. These can include: Legal fees Title insurance Land transfer tax (where applicable) Adjustments for property taxes or utilities prepaid by the seller Home inspection or appraisal fees (if not already paid) Your lawyer will provide a final statement of adjustments so you know exactly how much is due on closing day. Step 4: Sign the Paperwork A few days before closing, you’ll meet with your lawyer or notary to sign all the necessary documents, including: Mortgage agreement Title transfer Insurance confirmations Statement of adjustments Bring valid government-issued ID to this appointment. Step 5: Transfer of Funds On the day of closing: Your lender sends the mortgage funds to your lawyer Your lawyer combines these funds with your down payment and pays the seller Legal ownership of the property is transferred into your name The lender is registered on title as a secured creditor Step 6: Get the Keys! Once the paperwork is filed and the funds have cleared, your lawyer will confirm that the transaction is complete. You’ll then get the keys to your new home—officially making it yours. The Bottom Line The closing process is a series of important steps, but with the right team in place, it doesn’t have to be stressful. By working closely with your mortgage professional and lawyer, you’ll have guidance every step of the way—from signing the documents to turning the key in the front door. If you’d like help preparing for the closing process—or want a clear breakdown of your own closing costs— connect with us today.

Stress-Testing Your Mortgage Affordability: Why It Matters

By Marci Deane • October 1, 2025
Buying a home is one of the biggest financial commitments you’ll ever make. That’s why lenders want to be sure you can handle your mortgage payments—not just today, but also if interest rates rise in the future. This is where the mortgage stress test comes in. Many Canadians hear the term but aren’t entirely sure what it means or how it affects them. Let’s break it down in plain language. What Is the Mortgage Stress Test? The stress test is a rule introduced by the federal government that requires all mortgage applicants to qualify at a higher rate than the one they’ll actually pay. Currently, you must qualify at the greater of your contract rate + 2% or the benchmark qualifying rate (set by the Office of the Superintendent of Financial Institutions). For example: If your lender offers you a 5-year fixed mortgage at 5.25%, you must show you could still afford the payments at 7.25% . Even if rates don’t rise that high, the stress test ensures you won’t be overextended if they do. Why Does It Matter? The stress test protects both borrowers and lenders by: Preventing over-borrowing : It ensures you don’t take on more debt than you can realistically handle. Preparing for rate hikes : With interest rates fluctuating, it’s a safeguard against sudden increases. Strengthening financial stability : It lowers the risk of defaults, protecting the housing market as a whole. While it can sometimes feel like a barrier—reducing the amount you qualify for—it’s ultimately designed to keep you from becoming “house poor.” How Does It Impact Buyers? The stress test can significantly affect your homebuying budget. For example, without it, you might qualify for a $600,000 mortgage, but with the stress test applied, you may only qualify for $500,000. That doesn’t mean your dream of homeownership is out of reach—it just means you may need to adjust expectations or explore other strategies, such as: Increasing your down payment Paying down existing debts Considering alternative lenders who may have different qualification standards Why Work With a Mortgage Professional? Every lender applies the stress test, but not every lender views your application the same way. An independent mortgage professional can: Shop multiple lenders to find the best fit Run affordability scenarios at different rates Help you understand how much house you can truly afford—without stretching your finances too thin The Bottom Line The mortgage stress test isn’t meant to stop you from buying a home—it’s there to protect you from financial strain down the road. By understanding how it works and planning ahead, you can make smarter choices and buy with confidence. If you’re thinking about purchasing a home, refinancing, or simply want to know how the stress test affects your options, connect with us today. We’ll help you stress-test your budget and find the mortgage solution that works best for you.