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OSFI's MQR: Formula and Limits | Your Mortgage Minute · Your Mortgage Minute | Onlendhub

• 0:15
  SPEAKER_00: Welcome to another episode of Your Mortgage Minute.
• 0:18
  SPEAKER_00: I am Sarah, your co-host, with our mortgage expert Mooley here in the studio.
• 0:23
  SPEAKER_00: OSFI's got this minimum qualifying rate for uninsured mortgages, the greater of the contract rate plus two points or 5.25%.
• 0:32
  SPEAKER_00: Straightforward formula.
• 0:34
  SPEAKER_00: But I keep hearing borrowers treat it like it settles everything about renewals and switches.
• 0:40
  SPEAKER_00: Does it?
• 0:41
  SPEAKER_01: No.
• 0:42
  SPEAKER_01: That's the gap.
• 0:44
  SPEAKER_01: Meaning?
• 0:45
  SPEAKER_01: The formulas for uninsured mortgages.
• 0:48
  SPEAKER_01: OSFI doesn't spell out the rule for a straight renewal with your current lender.
• 0:54
  SPEAKER_01: An eligible uninsured straight switch, a refinance or new money, an amortization increase or insured files.
• 1:02
  SPEAKER_01: Different transactions get different treatment, and lender underwriting can differ too.
• 1:07
  SPEAKER_00: Okay, let's run a real example.
• 1:10
  SPEAKER_00: $480,000 balance, 1.9% now, renewing at 4.5, 25 years left on the amortization.
• 1:19
  SPEAKER_00: Original value 850,000.
• 1:22
  SPEAKER_00: Current appraisal 790,000.
• 1:25
  SPEAKER_00: If the stress test formula applies, what's the qualifying rate?
• 1:30
  SPEAKER_01: 4.5 plus 2 points is 6.5.
• 1:34
  SPEAKER_00: Which beats the 5.25 floor.
• 1:37
  SPEAKER_01: Right, so 6.5%.
• 1:40
  SPEAKER_01: But that's the formula, not a lender's final underwriting call.
• 1:45
  SPEAKER_00: Hold on though.
• 1:46
  SPEAKER_00: Someone renewing with their own lender is going to say, my rate's 4.5, so my payment's just based on that.
• 1:53
  SPEAKER_00: Are they wrong?
• 1:55
  SPEAKER_01: About the payment?
• 1:56
  SPEAKER_01: No.
• 1:57
  SPEAKER_01: Your contract payment can be based on the contract rate.
• 2:00
  SPEAKER_01: But qualifying is a separate question.
• 2:03
  SPEAKER_01: OSFI doesn't say a straight renewal is automatically subject to that prescribed rate.
• 2:09
  SPEAKER_01: Same for an eligible uninsured straight switch.
• 2:12
  SPEAKER_01: Not automatically subject either.
• 2:14
  SPEAKER_01: Your lender may still run its own tests.
• 2:17
  SPEAKER_00: Walk me through the payments.
• 2:19
  SPEAKER_00: What's the monthly impact?
• 2:21
  SPEAKER_01: At 1.9 on$480,000 over 25 years,$2,009 a month.
• 2:28
  SPEAKER_01: At 4.5,$2,657.
• 2:33
  SPEAKER_01: So that's$647 more a month, yeah.
• 2:38
  SPEAKER_01: And that's the contract rate comparison, not the stress test payment.
• 2:43
  SPEAKER_01: All these figures use the usual Canadian setup.
• 2:46
  SPEAKER_01: Nominal annual rate, compounded semi-annually, monthly payments.
• 2:51
  SPEAKER_00: Okay.
• 2:52
  SPEAKER_00: Next thing borrowers try.
• 2:54
  SPEAKER_00: Stretch the amortization.
• 2:56
  SPEAKER_00: Problem solved?
• 2:57
  SPEAKER_01: It lowers the payment.
• 2:59
  SPEAKER_01: 30 years at 4.5 gives you 2420 236 less than the 25-year renewal payment.
• 3:08
  SPEAKER_00: 236 bucks.
• 3:10
  SPEAKER_01: But your principal drops slower.
• 3:14
  SPEAKER_01: And OSFI doesn't set out how an amortization increase gets treated for qualifying.
• 3:20
  SPEAKER_01: So don't assume a longer amortization fixes qualification.
• 3:24
  SPEAKER_00: What about refinancing?
• 3:26
  SPEAKER_00: 80% of$850,000 was a$680,000 ceiling.
• 3:31
  SPEAKER_00: At the$790,000 appraisal, it's$632,000,$48,000 less room.
• 3:39
  SPEAKER_00: Does a refi get around the stress test?
• 3:42
  SPEAKER_01: No, that's just the loan-to-value math.
• 3:45
  SPEAKER_01: OSFI sets out the formula, but doesn't set out refinance or new money treatment.
• 3:51
  SPEAKER_01: And an appraisal alone doesn't get you approved.
• 3:54
  SPEAKER_01: Lender policy, income, credit, transaction type, all of it matters.
• 4:00
  SPEAKER_00: So refinancing is a gray area.
• 4:03
  SPEAKER_00: What if someone's folding other debt in while they're at it, say$40,000?
• 4:08
  SPEAKER_01: Same gray area.
• 4:10
  SPEAKER_01: In the illustration,$40,000 of consolidated debt carries a$221 monthly payment and$26,417 in total interest.
• 4:21
  SPEAKER_01: But rolling it in means a refinance.
• 4:23
  SPEAKER_01: So it's part of that same unanswered question.
• 4:27
  SPEAKER_00: What about insured mortgage files?
• 4:30
  SPEAKER_01: Different story.
• 4:31
  SPEAKER_01: OSFI's rule is about uninsured mortgages.
• 4:35
  SPEAKER_01: On insured switches and renewals, the sources don't agree.
• 4:39
  SPEAKER_01: So we can't settle insured treatment here.
• 4:41
  SPEAKER_01: That's a genuine boundary.
• 4:44
  SPEAKER_01: So what does the formula actually settle?
• 4:47
  SPEAKER_01: For uninsured mortgages where it applies, the minimum qualifying rate, greater of contract plus two points or 5.25.
• 4:57
  SPEAKER_01: At 4.5, that's 6.5%.
• 5:01
  SPEAKER_01: It doesn't settle straight renewals, eligible straight switches, refinances or new money, amortization increases or insured files.
• 5:11
  SPEAKER_00: And the rate increases lenders have been announcing lately?
• 5:14
  SPEAKER_01: Pricing policy, not a regulatory benchmark.
• 5:19
  SPEAKER_00: So, check your transaction type, don't assume the stress test works the same everywhere, and keep the contract payment separate from the qualifying test.
• 5:28
  SPEAKER_00: Thanks for listening to this episode of Your Mortgage Minute by OnlandHub.ca.
• 5:34
  SPEAKER_00: See you in another episode next week.
• 5:36
  SPEAKER_00: Until then, have a great week.
• 5:38
  SPEAKER_00: This is educational content only, not financial, legal, or tax advice.
• 5:43
  SPEAKER_00: And these figures are illustrative only.
• 5:46
  SPEAKER_00: Lender calculations, fees, insurance, taxes, and payment frequency can differ.