The OSFI (Office of the Superintendent of Financial Institutions) introduced a series of changes to its mortgage rules effective January 1, 2018 that includes all mortgages (both uninsured and insured) undergo a minimum qualifying rate or “stress test” to make sure that borrowers would still be able to repay their loans if interest rates rise or their circumstances change.
The stress test is designed to duplicate a borrower’s financial situation by assuming they would have to pay back the loan at the posted average-not whatever deal was negotiated. Under the new rules, borrowers would be stress-tested at either the five-year benchmark rate, or two percent higher than their actual mortgage rate-whichever one is higher.
Note-the new stress test rules would not apply to mortgage renewals as long as they are with the borrower’s existing lender.
