19 Feb

Stress Test Changes


Posted by: Rosa-Anna DeMichina

Effective April 6, Canadians applying for default-insured mortgages will no longer be subject to an improperly devised “stress test.”

This change will affect anyone getting an insured mortgage, including those putting down less than 20 per cent on a new purchase – for which default insurance is generally mandatory. It’ll also move the goalposts closer for borrowers trying to qualify for a mortgage with 20 per cent equity or more.


Today, people getting insured mortgages must prove they can afford a payment based on the benchmark five-year posted rate. The Bank of Canada calculates this rate from typical big-bank rates, and it’s currently 5.19 per cent.

Starting on April 6, a new and improved benchmark rate will be used. It’ll be based on the country’s median five-year fixed insured-mortgage rate, plus two percentage points. If that rate were in existence today, it would be about 4.89 per cent, says the Department of Finance. That’s 30 basis points less than the current (minimum) stress-test rate.

(There are 100 basis points in a percentage point.)

If you’re a mortgage shopper wondering whether any of this matters, here are nine reasons why it does:

1. The stress test is no longer determined by the biggest banks

Prior to this, the Big Six banks determined the benchmark rate, which serves as a minimum stress-test rate. It’s taken a few years, but officials have finally realized that’s not a good idea. For well over a year, banks have refused to cut their posted five-year rates enough to reduce this all-important qualifying rate. That’s kept the stress test unnecessarily difficult, blocking thousands of borrowers from qualifying for the best mortgage – or qualifying at all.

2. It’s economically beneficial

 When interest rates dive, it’s usually indicative of a slowing economy. By keeping their posted rates high, banks prevented the stress test from adapting to lower economic growth expectations.

This new benchmark rate is more flexible. As economic prospects dim and rates decline, more people will qualify for a mortgage, and vice versa. That gives our housing-dependent economy a boost when it needs it most and slows economic growth when it gets too hot.

3. It’ll also make the uninsured stress test more fair

Canada’s banking regulator, the Office of the Superintendent of Financial Institutions (OSFI), is expected to use the same benchmark rate for the uninsured stress test, which applies to borrowers with 20 per cent equity or more.

It said on Tuesday, “OSFI is proposing that the new [uninsured] benchmark rate for qualifying uninsured mortgages be the greater of:

  • The contractual mortgage rate plus 200 bps; or
  • The new benchmark rate (i.e. the weekly median five-year fixed insured-mortgage rate as calculated by the Bank of Canada from federally backed mortgage-insurance applications adjudicated by mortgage insurers, plus 200 bps).”

The majority of existing mortgages in this country are uninsured. OSFI’s stress test will remain tougher than the insured stress test because, as it puts it, “… uninsured mortgages … may have borrower and loan characteristics that are riskier than … insured mortgages.”

4. It’ll heat up home prices

Assuming rates stay the same by April, by my calculations a 30-bps reduction in the stress test would give most borrowers upward of 3 per cent more buying power. That won’t send home prices to the moon, but it should take them higher into the atmosphere.

Already, the national average home price is up 11.2 per cent in the past 12 months. This news creates unequivocally bullish market psychology, particularly heading into the high season for homebuying.

5. Expect more purchasing power to come

Other things equal, the buying-power boost discussed above could be magnified if mortgage rates fall further. The market implies that’s a good probability given Canada’s yield curve is inverted – long-term rates are lower than short-term rates. That’s traditionally been a sign of even lower rates ahead.

Some economists are predicting a Bank of Canada rate cut as soon as this spring or summer. That could drop the stress-test rate floor once again. (Although an easier stress test might arguably reduce the central bank’s desire to lower rates further.)

And then, of course, there’s the coronavirus, an unquantifiable wild card that could further weigh on rates.

When all’s said and done, we could potentially see a 50- to 100-plus-bps reduction in the stress-test rate by sometime next year.

6. The timing’s not ideal

There’s usually not a bad time to right a wrong, and the stress test did need fixing. But heading into a spring market with housing supply shortages, bidding wars in big markets and falling rates, this change could further fuel housing imbalances and over-indebtedness. For that reason, it might have been wiser to wait until summer to ease the stress test.

Then again, no one can predict home prices, and regulators may have something else up their sleeves to counterbalance the stimulative effect of this change. Based on OSFI’s Jan. 24 speech, the government is clearly concerned about the resurgence in borrowers with high loan-to-income ratios. More credit-tightening could eventually be on the way, particularly if home prices keep soaring.

In short, it’s not a given that the timing of this announcement is “bad.”

7. It takes pressure off banks to cut posted rates

This is one potential negative. Banks have been under the spotlight because their inflated posted rates adversely affect the stress test. Now, with policy-makers decoupling the stress test from posted five-year rates, banks will face less pressure to lower those rates.

That means the gap between posted and actual mortgage rates could widen, given that actual rates fall quicker than posted rates and given that banks are incentivized to keep posted rates elevated. This could result in bigger and more painful “interest-rate-differential penalties” for people who break fixed-rate mortgages early.

8. Expect more rate-timing

If you’re someone with high debt ratios, an easier stress test helps. Now that we’ll have an objective and responsive stress-test rate, it’s possible we’ll see more borrowers – those who almost qualify for a mortgage – trying to time rates. Folks whose debt ratios are too high under the then-current stress-test rate might defer their mortgage application until rates fall “enough.”

Conversely, some people could be caught waiting longer than anticipated if rates unexpectedly jump. The moral for those considering this strategy: Don’t try rate-timing.

9. The new benchmark is useful for rate shoppers

This is the first time the government will be publishing median market-wide insured-mortgage rates. Insured borrowers will be able to use that info to quickly compare the rate they’re being offered with the rates other people are getting. This could result in fewer lenders getting away with quoting inferior rates.

8 Feb

Mortgage renewals with the same lender are on the rise, but should you just sign on the dotted line?


Posted by: Rosa-Anna DeMichina

Mortgage brokers are not just for buying homes. Your relationship with a broker is not done until you are mortgage free so the notion of a renewal is just as important as a home purchase mortgage. Check out this great article from my colleague Jeremy.

If you’re in a mortgage that’s coming up for renewal in the coming months and you’re considering just staying with your current lender, you wouldn’t be alone.
According to the Canadian Mortgage and Housing Corporation’s (CMHC) Residential Mortgage Industry Report released in the summer, in 2018, the number of mortgage renewals with the same lender increased by 16 per cent over the previous year.
The report suggested one of the factors that may have contributed to large increases in loan renewals with the same institution are the tighter approval criteria. In other words, people are worried they may not qualify for a new mortgage if they switch lenders, so they’re staying put.
You’ll remember in the fall of 2017, OSFI, (the Office of Superintendent of Financial Institutions) the agency that regulates the financial industry, announced tighter rules on mortgages. The biggest change related to uninsured mortgages, or homebuyers with 20 per cent or more for a down payment. These people are now required to go through a “stress test” or qualify using a minimum qualifying rate.
The changes came a year after a similar stress test was introduced for insured mortgages.
If the tighter mortgage rules still have you stressed as you face a mortgage renewal, the CMHC report noted the approval rate for same lender renewals remained stable at 99 per cent. Renewals are not specifically subject to the new stress test and are more likely to meet current lender criteria, the reported noted.
So, does that mean you should just automatically renew your mortgage with the same lender when your term is up? Not necessarily. You need to reach out to a mortgage professional to get the best advice.
For starters, most lenders, especially the big banks, will send you a renewal letter when there’s about three months left on the term. Sometimes that letter could come with six months left. Typically, the lender will offer you a rate at that time and all you’ll have to do is sign at the bottom line to roll over your mortgage.
But beware, lenders often offer a higher rate than a new client because they’re hoping the ease of renewal will keep you from seeking out a new lender and lower rate.
In some cases, it may be best to just sign and roll over your mortgage. There are a few things to consider. If you decide to change lenders, you’ll basically have to go through an approval process again. That entails getting all your documents, lawyer’s fees and appraisals.
You’ll have to ask yourself, is it worth the effort to save a few basis points off your rate, or a few hundred dollars over a term to make the switch?
For some it won’t be. But, if a switch can lead to saving thousands of dollars, it would certainly be something to consider. While everyone’s situation is different, the larger the mortgage, the bigger the savings will be if you can find a lower rate.
Often, homeowners will just use a bank their parents recommend for their first mortgage. But they might find themselves not happy with the service or terms of the mortgage and may just want to switch to a different lender as the mortgage comes up for renewal.
If that’s a situation you find yourself in, you have options, and a Dominion Lending Centres mortgage broker can help you make the best decision.

Jeremy Deutsch
Communications Advisor
3 Feb

Payment Frequency


Posted by: Rosa-Anna DeMichina


One of the decisions you will need to make before your new mortgage is set up, is what kind of payment frequency you would like to have. For many, sticking to a monthly payment is the default, however, different frequencies may end up saving you less interest over time.

Monthly Payments

Monthly payments are exactly as they sound, one payment every month until the maturity date of you mortgage at the end of your term. Took a 3-year term? You will make 36 payments (12 payments a year) and then you will need to renegotiate your interest rate. 5-year term? You will make 60 payments.

$500,000 mortgage

3% interest rate

5-year term

$2,366.23 monthly payment


$427,372.90 remaining over 20 years

$69,346.70 paid to interest

$72,627.01 paid to principal


Semi Monthly

Semi-monthly is not bi-weekly. Semi monthly is your monthly payment divided by two. That means, you are making 24 payments every year, but each payment is slightly less than half of what the monthly payment would of been.

$500,000 mortgage

3% interest rate

5-year term

$1,182.38 semi monthly payment


$427,372.99 remaining over 20 years

$69,258.59 paid to interest

$72,627.01 paid to principal



Bi-weekly, you are not making 2 payments every month. With 52 weeks in a year, you are actually making 26 payments, 2 more than semi-monthly (2 months a year you make 3 bi-weekly payments). The interest paid and balance owing are slightly less than the others, but mere cents. You will still need to make payments for another 20 years.

$500,000 mortgage

3% interest rate

5-year term

$1,091.38 bi-weekly payment


$427,372.36 remaining over 20 years

$69,251.76 paid to interest

$72,627.64 paid to principal


Accelerated Bi-Weekly

Just like regular bi-weekly, you are not making 2 payments every month. With 52 weeks in a year, you are actually making 26 payments, 2 more than semi-monthly. However because this is accelerated, the payment amount is higher.

$500,000 mortgage

3% interest rate

5-year term

$1,183.11 accelerated bi-weekly payment


$414,521.40 remaining over 17 years 4 months

$68,325.70 paid to interest

$85,478.60 paid to principal


You have increased your yearly payment amount by $2,384.98, $11,924.90 over 5-years. That extra $11,924.90 has decreased your outstanding balance at the end of your mortgage term by $12,850.96 because more of your payments went to principal and less went to interest. Also, you will now have your mortgage paid off more than 2.5 years earlier.

The same option is available for accelerated weekly payments which will shave another month off of time required to pay back the whole loan as well. If you can afford to go accelerated, your best option is to do so! Especially in the early years where a larger portion of your payments are going towards interest, not paying down your principal.

If you have any more questions, please do not hesitate to reach out to a Dominion Lending Centres mortgage professional near you.

Dominion Lending Centres – Accredited Mortgage Professional
30 Jan

5 Mistakes First Time Home Buyers Make


Posted by: Rosa-Anna DeMichina

5 Mistakes First Time Home Buyers Make

Buying a home might just be the biggest purchase of your life—it’s important to do your homework before jumping in! We have outlined the 5 mistakes First Time Home Buyers commonly make, and how you can avoid them and look like a Home Buying Champ.

1. Shopping Outside Your Budget
It’s always an excellent idea to get pre-approved prior to starting your house hunting. This can give you a clear idea of exactly what your finances are and what you can comfortably afford. Your Mortgage Broker will give you the maximum amount that you can spend on a house but that does not mean that you should spend that full amount. There are additional costs that you need to consider (Property Transfer Tax, Strata Fees, Legal Fees, Moving Costs) and leave room for in your budget. Stretching yourself too thin can lead to you being “House Rich and Cash Poor” something you will want to avoid. Instead, buying a home within your home-buying limit will allow you to be ready for any potential curve balls and to keep your savings on track.


2. Forgetting to Budget for Closing Costs
Most first-time buyers know about the down payment, but fail to realize that there are a number of costs associated with closing on a home. These can be substantial and should not be overlooked. They include:

  • Legal and Notary Fees
  • Property Transfer Tax (though, as a First Time Home Buyer, you might be exempt from this cost).
  • Home Inspection fees

There can also be other costs included depending on the type of mortgage and lender you work with (ex. Insurance premiums, broker/lender fees). Check with your broker and get an estimate of what the cost will be once you have your pre-approval completed.

3. Buying a Home on Looks Alone
It can be easy to fall in love with a home the minute you walk into it. Updated kitchen + bathrooms, beautifully redone flooring, new appliances…what’s not to like? But before putting in an offer on the home, be sure to look past the cosmetic upgrades. Ask questions such as:

  1. When was the roof last done?
  2. How old is the furnace?
  3. How old is the water heater?
  4. How old is the house itself? And what upgrades have been done to electrical, plumbing, etc.
  5. When were the windows last updated?

All of these things are necessary pieces to a home and are quite expensive to finance, especially as a first- time buyer. Look for a home that has solid, good bones. Cosmetic upgrades can be made later and are far less of a headache than these bigger upgrades.

4. Skipping the Home Inspection
In a red-hot housing market a new trend is for homebuyers to skip the home inspection. This is one thing we recommend you do not skip! A home inspection can turn up so many unforeseen problems such as water damage, foundational cracks and other potential problems that would be expensive to have to repair down the road. The inspection report will provide you a handy checklist of all the things you should do to make sure your home is in great shape.

5. Not Using a Broker
We compare prices for everything: Cars, TV’s, Clothing… even groceries. So, it makes sense to shop around for your mortgage too! If you are relying solely on your bank to provide you with the best rate you may be missing out on great opportunities that a Dominion Lending Centres mortgage broker can offer you. They can work with you to and multiple lenders to find the sharpest rate and the best product for your lifestyle.

Geoff Lee
Dominion Lending Centres – Accredited Mortgage Professional
30 Jan

How to Verify Your Down Payment When Buying a Home


Posted by: Rosa-Anna DeMichina

How to Verify Your Down Payment When Buying a Home

Saving for a down payment is one of the biggest challenges facing people wanting to buy their first home.
To fulfill the conditions of your mortgage approval, it’s all about what you can prove (hard to believe – but some people have lied in the past – horrors!).
Documentation of down payment is required by all lenders to protect against fraud and to prove that you are not borrowing your down payment, which changes your lending ratios and potential your mortgage approval.


This is a government anti-money laundering requirement and protects the lender against fraud.

1. Personal Savings/Investments: Your lender needs to see a minimum of 3 months’ history of where the money for your down payment is coming from including your: savings, Tax Free Savings Account (TFSA) or investment money.

  • Regularly deposit all your cash in the bank, don’t squirrel your money away at home. Lenders don’t like to hear that you’ve just deposited $10,000 cash that has been sitting under your mattress. Your bank statements will need to clearly show your name and your account number.
  • Any large deposits outside of “normal” will need to be explained (i.e. tax return, bonus from work, sale of a large ticket item). If you have transferred money from once account to another you will need to show a record of the money leaving one account and arriving in the other. Lenders want to see a paper trail of where your down payment is coming from and how it got into your account.


2. Gifted Down Payment: In some expensive real estate markets like Metro Vancouver & Toronto, the bank of Mom & Dad help 20% of first time home buyers. You can use these gifted funds for your down payment if you have a signed gift letter from your family member that states the down payment is a true gift and no repayment is required.

  • Gifted down payments are only acceptable from immediate family members: parents, grandparents & siblings.
  • Be prepared to show the gifted funds have been deposited in your account 15 days prior to closing. The lender may want to see a transaction record. i.e. $30,000 from Bank of Mom & Dad’s account transferred to yours and a record of the $30,000 landing in your account. Bank documents will need to show the account number and names for the giver and receiver of the funds. Contact me for a sample gift letter.

3. Using your RRSP: If you’re a First Time Home Buyer, you may qualify to use up to $35,000 from your Registered Retirement Savings Plan (RRSP) for your down payment.

  • Home Buyers Plan (HBP): Qualifying home buyers can withdraw up to $35,000 from their RRSPs to assist with the purchase of a home. The funds are not required to be used only for the down payment, but for other purposes to assist in the purchase of a home.
  • If you buy a qualifying home together with your spouse or other individuals, each of you can withdraw up to $35,000.
  • You must repay all withdrawals to your RRSP’s 15 years. Generally, you will have to repay an amount to your RRSP each year until you have repaid the entire amount you withdrew. If you do not repay the amount due for a year (i.e. $35,000/15 years = $2,333.33 per year), it will be added to your income for that year.
  • Verifying your down payment from your RRSP, you will need to prove the funds show a 3-month RRSP history via your account statements which need to include your name and account number. Funds must be sitting in your account for 90 days to use them for HBP.

4. Proceeds from Selling Your Existing Home: If your down payment is coming from the proceeds of selling your currently home, then you will need to show your lender an accepted offer of Purchase and Sale (with all subjects removed) between you and the buyer of your current home.

  • If you have an existing mortgage on your current home, you will need to provide an up-to-date mortgage statement.

5. Money from Outside Canada: Using funds from outside of Canada is acceptable, but you need to have the money on deposit in a Canadian financial institution at least 30 days before your closing date.  Most lenders will also want to see that you have enough funds to cover Property Transfer Tax (in BC) PLUS 1.5% of the purchase price available in your account to cover your closing costs (i.e. legal, appraisal, home inspection, taxes, etc.).

  • Property Transfer Tax (PTT) All buyers pay Property Transfer Tax (except first-time buyers purchasing under $500,000 and New Builds under $750,000). This is a cash expense, in addition to your down payment.
    Property Transfer Tax (PTT) cannot be financed into the mortgage
Buying a home for the first time can be stressful, therefore being prepared with the right documentation for your down payment and closing costs can make the process much easier.
Mortgages are complicated, but they don’t have to be. Contact a Dominion Lending Centres mortgage professional near you.
Kelly Hudson
Dominion Lending Centres – Accredited Mortgage Professional