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What OSFI B-20 Says — And What It Doesn't | Your Mortgage Minute · Your Mortgage Minute | Onlendhub

• 0:15
  SPEAKER_00: Welcome to another episode of Your Mortgage Minute.
• 0:17
  SPEAKER_00: I am Sarah, your co-host with our mortgage expert Mooley here in the studio.
• 0:22
  SPEAKER_00: Okay, Mooley, I want an audit of the official record.
• 0:26
  SPEAKER_00: Everybody's got a take on what OSFI's B-20 says about renewal switches, stress tests, amortization.
• 0:33
  SPEAKER_00: What does the record actually say?
• 0:35
  SPEAKER_01: Honestly, less than people think.
• 0:37
  SPEAKER_01: OSFI's B-20 is a regulatory framework issued by the Office of the Superintendent of Financial Institutions that sets the prudent underwriting standards for residential mortgages applied by federally regulated financial institutions.
• 0:50
  SPEAKER_01: The B-20 consultation summary and the OSFI info sheet lay out principles.
• 0:56
  SPEAKER_01: The specifics live in lender underwriting.
• 0:59
  SPEAKER_01: Those are two different things.
• 1:01
  SPEAKER_00: So give me the principles.
• 1:02
  SPEAKER_01: B-20, principle three, says federally regulated lenders have to assess whether a borrower can actually service the debt.
• 1:10
  SPEAKER_01: The consultation summary says GDS and TDS ratios should be calculated conservatively at an interest rate above the contract rate.
• 1:18
  SPEAKER_01: That's a general underwriting baseline.
• 1:20
  SPEAKER_01: It's not a renewal rule.
• 1:22
  SPEAKER_00: Okay, straight renewal then.
• 1:24
  SPEAKER_00: Same lender, no new money.
• 1:26
  SPEAKER_00: Does the official record say you have to requalify or sit the stress test?
• 1:30
  SPEAKER_01: No.
• 1:30
  SPEAKER_01: There's no OSFI or CMHC primary document that says whether a same lender renewal triggers requalification or a stress test.
• 1:39
  SPEAKER_01: The guidance is general.
• 1:40
  SPEAKER_01: There's no straight renewal rule.
• 1:42
  SPEAKER_00: What about the eligible uninsured straight switch?
• 1:45
  SPEAKER_00: That's the one everyone quotes from 2024.
• 1:48
  SPEAKER_01: Same story.
• 1:49
  SPEAKER_01: The Globe, Rate Hub, that's secondary coverage.
• 1:52
  SPEAKER_01: They describe a November 2024 OSFY change with conditions attached, but nothing in the official primary material defines a straight switch, sets the eligibility criteria or creates that exemption.
• 2:06
  SPEAKER_00: Hold on.
• 2:07
  SPEAKER_00: If the official record's that quiet, isn't this whole exercise useless?
• 2:12
  SPEAKER_01: Not at all.
• 2:12
  SPEAKER_01: People repeat secondary coverage like it's the rule that matters at the counter.
• 2:17
  SPEAKER_01: If a lender tells you OSFI requires something the official record doesn't establish, you can ask which document.
• 2:24
  SPEAKER_01: And an eligible uninsured straight switch isn't automatically subject to the prescribed minimum qualifying rate.
• 2:30
  SPEAKER_01: The official rules and lender underwriting can differ by transaction.
• 2:35
  SPEAKER_00: The qualifying rate formula, is that in the record?
• 2:38
  SPEAKER_01: Not exactly.
• 2:39
  SPEAKER_01: The consultation mentions the stress test and says lenders test with a rate above the contract rate, but it doesn't state the formula, neither does the info sheet.
• 2:48
  SPEAKER_01: What we do know where the prescribed formula applies, it's the greater of contract rate plus two percentage points or 5.25%.
• 2:56
  SPEAKER_00: Run the numbers.
• 2:57
  SPEAKER_00: Contract rate at 4.5.
• 2:59
  SPEAKER_01: 4.5 plus 2 is 6.5.
• 3:02
  SPEAKER_01: 5.25 is lower, so 6.5% wins.
• 3:07
  SPEAKER_01: That's the prescribed qualifying rate if it applies.
• 3:10
  SPEAKER_01: How about insured borrowers switching at renewal?
• 3:12
  SPEAKER_01: Not established in the primary sources.
• 3:15
  SPEAKER_01: The CMHC material covers portability, transferring your insurance to a new property, premium credits.
• 3:22
  SPEAKER_01: It doesn't touch renewal switch stress testing.
• 3:25
  SPEAKER_00: Come on, though.
• 3:26
  SPEAKER_00: Thousands of insured borrowers switch every year.
• 3:29
  SPEAKER_01: They do, but anyone claiming insured switches get different treatment is citing commentary, not the official rule.
• 3:35
  SPEAKER_01: I can only tell you what the documents actually establish.
• 3:38
  SPEAKER_01: That's the whole point of doing this.
• 3:39
  SPEAKER_00: Fine.
• 3:40
  SPEAKER_00: Amortization math.
• 3:42
  SPEAKER_00: $480,000 balance,$1.9 now.
• 3:45
  SPEAKER_00: Renewing at 4.5, 25 years left.
• 3:49
  SPEAKER_00: Current payment?
• 3:50
  SPEAKER_01: On standard Canadian compounding, semi-annual monthly payments,$2,09 a month.
• 3:56
  SPEAKER_00: Renewal at$4.5, same 25 years?
• 3:59
  SPEAKER_01: $26.57,$647 more a month.
• 4:03
  SPEAKER_00: And stretching to 30 years of amortization?
• 4:05
  SPEAKER_01: $24.20,$236 less than the 25-year renewal payment.
• 4:10
  SPEAKER_01: But principal drops slower and you pay more interest over the life of it.
• 4:14
  SPEAKER_01: It's a cash flow lever, not a savings trick.
• 4:17
  SPEAKER_00: Does the record say amortization can go up at renewal or switch?
• 4:21
  SPEAKER_01: No.
• 4:21
  SPEAKER_01: CMHC's portability material says a new loan's amortization on a straight portability can't exceed what's left on the original loan.
• 4:29
  SPEAKER_01: That's about moving to a new property.
• 4:31
  SPEAKER_01: It doesn't create a general renewal or switch amortization increase.
• 4:35
  SPEAKER_00: Equity side.
• 4:41
  SPEAKER_01: So, Sarah, the ceiling moves from$680,000 to$632,000,$48,000 less room, but the appraisal doesn't decide approval by itself.
• 4:51
  SPEAKER_01: Lender policy, income, credit, the whole file.
• 4:54
  SPEAKER_01: And if you're rolling in$40,000 of debt at an illustrative$221 a month,$26,417 in interest all told, that's part of the picture too.
• 5:05
  SPEAKER_01: So what's the takeaway?
• 5:06
  SPEAKER_01: Ask which document, keep the official rule, lender policy, and whatever illustration you've got in front of you in separate buckets, read the renewal offer before you sign, and get the requalification answer in writing.
• 5:20
  SPEAKER_00: That's the audit.
• 5:21
  SPEAKER_00: Everything here is educational and illustrative only.
• 5:25
  SPEAKER_00: Lender calculations, fees, insurance, taxes, and payment frequency can differ.
• 5:31
  SPEAKER_00: And none of this is financial, legal, or tax advice.
• 5:35
  SPEAKER_00: Thanks for listening to this episode of Your Mortgage Minute by OnlandHub.ca.
• 5:40
  SPEAKER_00: See you in another episode next week.
• 5:42
  SPEAKER_00: Until then, have a great week.