A Decade of Mortgage Tightening

By  Dwight Trafford |   | Posted in " Debt Consolidation, Debt Reduction, First-Time Home Buyers, Money Saving, Mortgage Advice, Mortgage Broker, Mortgage Financing Needs, Mortgage Information, Refinance "

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Lately, there has been a lot of discussion in the media as to whether mortgage rules will tighten up again, or will begin to soften, it is hard to say which direction policy-makers will lean.


Without a doubt, the process of obtaining financing has changed dramatically over the last decade, and many of the rules were introduced within the last 5 years.  If you have not been through a new purchase or a refinance since all these changes have taken place, this article is for you.  In fact, when I researched the rule changes since 2008 for this blog post, it would have taken 11 pages to print… and that is just since 2008 alone! 


Here is a recap of some the rule changes over the last decade:



  • Amortizations reduced from 40 years to 35 years

  • Minimum 5% downpayment from your own resources is required

  • Lenders required to obtain sufficient evidence of a property’s value and a borrower’s income



  • Fixed & Variable terms under 5 years must be qualified at the 5-yr posted rate (qualifying rate)

  • Refinance amounts are reduced from 95% to 90% of the value of the property



  • Amortization is reduced from 35 years to 30 years

  • Refinance amounts are reduced from 90% to 85% of the value of the property



  • Refinance amounts are further reduced from 85% to 80% of the value of the property

  • Maximum amortization is shortened from 30 years to 25 years on insured (high-ratio) mortgages

  • New Gross-Debt Service (GDS) and Total-Debt Service (TDS) Ratios of 39%/44%, respectively, are implemented for Borrowers with credit scores 680 and higher


Wow… no major rule changes for a couple years, and then:



  • For homes over $500,000, 10% downpayment is required on the amount over $500,000 (the rule did not take effect until Feb 2016)



  • 15% Foreign-Buyers Tax introduced in Vancouver to cool the market

  • Mortgage Insurers re-assess criteria for Capital Requirements, which include:

    • Loan-to-Value and Type of Mortgage

    • Credit Score

    • Length of time since last credit report was pulled

    • Likelihood of a Borrower’s credit score going up or down

    • Amortization period

    • How long the mortgage insurance policy has been in place (applicable to lenders)

    • Region where the property is located

  • All High-Ratio mortgages (less than 20% downpayment) to be qualified with the 5-year posted/qualifying rate



  • Ontario introduces 15% Foreign Buyer Tax in their “Fair Housing Plan” attempt to cool the market

  • B-20 Stress Test drafted and finalized indicating that underwriters must assess borrower affordability based on the higher of their contracted mortgage rate + 2%, or the 5-year Benchmark Fixed Rate as determined by the Bank of Canada

    • Stress-Test requirements must also include:

      • indended use of the loan (purchase or refinance)

      • type of purchase must be distinguished (owner-occupied, rental, investment)

      • type of refinancing (debt consolidation, investment, etc.)



  • Stress-Test is effective Jan 1


So, what does this mean for 2019? 


In the past few days, there was talk of even more regulation and applying the B-20 Stress-Test to Private Mortgages, but that was dismissed.  There were also some talks of de-regulation, and easing of some mortgage qualification rules, like increasing the amortization back to 35 years, and debates as to whether the B-20 Stress-Test provides a “fair” indicator of whether clients can support rate increases.  No matter what changes occur, I will be sure to keep you up-to-date and let you know how it can impact you.


- Dwight Trafford