The Office of the Superintendent of Financial Institutions
(OSFI), Canada's top banking regulator, introduced new rules on
mortgage lending this month, which will take effect January 1,
2018. The rules include a minimum qualifying rate, or what is
called a "stress test" for uninsured mortgages. The test
is a way to ensure that the loans can withstand higher interest
rates and that the borrower will be able to pay the loan should the
interest rates increase.
These rules will now apply to uninsured mortgages, whereas in
the past the stress test was only used on uninsured mortgages.
Borrowers are required to obtain mortgage insurance when they have
paid a down payment of under 20% of the value of their home price.
An uninsured mortgage refers to a loan with a down payment of 20%
or higher of the value of the home price and an insured mortgage
refers to mortgages with a down payment of 5-19.99%.
