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What are the New OSFI Rules?

We’ve talked about the new OSFI rules before, both when they were first proposed and then again when they were instated as the new rules federally-regulated banks had to follow. But, that was way back in July when they were first announced. These rules went into effect on November 1, 2012 – Thursday of this week. And now, any financial institution that is federally-regulated needs to follow them. Because of that, we thought we’d give you a refresher on just what those rules were.

  • Amount borrowed on HELOCshas been reduced from 80% to 65% of loan-to-value ratio. This means that if you apply for a HELOC today, you will only be able to borrow up to 65% of the equity that’s in your home. If you already have a HELOC, it won’t be touched.
  • The qualifying rate, which is a higher rate than what you’ll actually pay on your mortgage, has been toughened for those that want a mortgage shorter than five years. Having to qualify at a higher rate means that it’s tougher to get a mortgage.
  • Stated income mortgages have come to an end. Most lender had already stopped loaning on stated incomes before these new rules went into effect; but now they will be eliminated completely. Notice of Assessments, pay stubs, or other official documentation of income is a must if you want to apply for a mortgage today.
  • Cash-back mortgages have been eliminated. The act of “cash back mortgages” allowed borrowers to borrow their down payment by receiving additional cash at the time their original mortgage deal closed. With the new rules, cash back can no longer be offered, and this will be a great help in keeping our mortgage market stable. This was also a practice that had been largely eliminated before the new rules came into effect.
  • Stricter policies have gone into effect for calculating a borrower’s monthly payment on unsecured debt, such as credit cards. Tougher rules have also been placed on calculating a homeowner’s heating costs – something else that also affects the debt ratio calculation.

There were a lot of rules announced this summer when OSFI made them official; and this list only includes those rules that are most talked about and that will affect consumers the most. Remember though, these changes only went into effect at institutions that are federally regulated. That means that if you want to get a private mortgage, or you want to go through a credit union (which are provincially mandated,) to get your home loan, these new rules won’t necessarily apply to you.

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