In July, the Office of the Superintendent of Financial Institutions (OSFI) sent out a release indicating that changes would be announced, and shortly there after implemented, in the fall of this year.  It is expected that the changes will focus on uninsured mortgages.  Significant changes were made to insured mortgage regulations in the fall of 2016.  Some of these changes made several types of previously insured mortgages uninsurable, such as all refinances.  Read our blog “New Mortgage Rules Announced” from October 2016 for more details on last year’s changes.

As a result of those changes in 2016, all insured mortgages had to be ‘qualified’ using the BOC (Bank of Canada) benchmark rate.  Previously all 5 year fixed rate mortgages would be ‘qualified’ on the contract rate (interest rate actually being paid) and any lesser term or any variable rate mortgage must qualify on the benchmark rate.  Also, the amortization period was reduced to a maximum of 25 years on ALL insured mortgages.  Currently the benchmark rate is 4.84%.

‘Qualifying’ Rate – this is the interest rate used to calculate the monthly mortgage payment and affordability of the mortgage, given your current debt obligations and income.

It is expected that OSFI will implement that all uninsured mortgages will have to ‘qualify’ at the contract rate plus 2%.  For example, if you secure an interest rate of 3.39%, it will have to be qualified using 5.39%.  Or if your rate is 5.24%, affordability will have to be calculated at 7.24%.  That is a big difference.  This will significantly impact the mortgage amount that anyone will qualify for.

If you are considering doing a refinance of your mortgage or if your mortgage is coming up for renewal in the next year, please give us a call to do your mortgage review now, before these changes come into effect.