30 Jan What is the B-20 factor? What will be its impact?
As we have now entered well into 2018, many people – more specifically homebuyers – are still wondering how the new regulations will affect them. We have tried to address the different aspects of these regulations that make it tougher to get a mortgage.
Guideline B-20 or the B-20 factor as is often referred to, is the latest crop of mortgage rules introduced by Canada’s federal banking regulator, the Office of the Superintendent of Financial Institutions (OSFI). It requires all low-ratio mortgage applicants (those paying more than 20% down) and refinancers undergo a stress test to ensure they can still afford their monthly mortgage payments should rates rise. Under the new criteria, borrowers must qualify at either the Bank of Canada benchmark rate (currently 4.99%), or their contract rate plus 2% – whichever is higher. The stress tests will reduce homebuying budgets by 20%, and experts think they could remove as many as 10% of prospective buyers from the market.
Stress testing isn’t the only change ushered in by B-20; the new rules also ban the use of “co-lending” or “bundled” mortgages, which combine up to three mortgages to help credit- or cash-strapped borrowers exceed their required loan to value ratios.
For all the details concerning the B-20 factor, please contact us. We will be more than glad to go over them with you.