With increasing in housing prices across the country and tightened mortgage qualification rules (such as “Stress Test”), it’s more and more difficult to qualify  for a mortgage nowadays. Here are a few helpful tips for home owners to borrow more and secure a bigger mortgage for your dream home:

1). Try to Make 20% Down Payment 
By making 20% down payment, it is not only avoiding paying mortgage default insurance premium, but also allowing borrowers to choose longer amortization. As of today, conventional mortgages allows a maximum 30 years amortization. (In some cases, lenders allow up to 40 years amortization). The longer amortization lowers monthly mortgage payments, resulting larger qualified mortgage amount. 

2). Maximize Income
Whether you are business for self or full time employee, there might be other source of “income” we can use to support financing. Other income such as alimony, child support, overtime, bonus, rental income, Canada child benefit (CCB), investment income etc. are all acceptable income sources.
Adding a co-borrower from family is another way to increase borrowing power, ideally a co-borrower/co-signor with high income and less debts is able to increase borrowing ability significantly.

3). Minimize Existing Debts 
The debt servicing ratio is one of the metrics used to qualify borrower for a mortgage loan. If we cannot increase the income, paying out or consolidate existing debts is another way to boost borrowing power. Common debts that will affect your borrower ability are: car loan/lease, student loan, credit card debts and personal line of credit balances, etc.

4). Keep A Good/Clean Credit History 
In general, the debt servicing ratios are tightened when borrowers’ credit score is less than 680. The tightened debt servicing ratios simply means lesser mortgage loan amount qualified. Here are a few simply ways to keep a clean credit history and maintain high credit score: 

• Always pay the bills on time, even it is minimum payment
• Do not max out the credit limit 
• Avoiding multiple credit inquiries in a short period

5).Seeking Alternative Solutions 
You may have unique financial situation and cannot get qualified with your own bank. There are special mortgage products available to suite borrowers’ unique financial situations. Here are some examples of alternative mortgage solution:

• Net worth Program: Designed for borrowers with high net worth/strong assets.
• No Stress Test Mortgage: Allows borrower to borrow up to 9 times of reported income.
• Business for Self Program: Designed for self employed borrowers with low reported personal income. 

The Office of the Superintendent of Financial Institutions (OSFI) is proposing a higher qualifying rate for uninsured mortgages/traditional mortgages (down payment at or higher than 20%) in Canada.  Instead the current 4.79%, it is proposing to use the higher of 5.25% or contract rate +2% to qualify for traditional mortgages. It is also suggesting to review and set qualifying rate at least once a year to ensure it aligns with current market conditions.

With the increase qualifying rate, borrowers’ borrowing power will be reduced by around 5%.

For example, a borrower with $100K annual income will qualify for $475K mortgage at 5.25% rate  instead of $500K at current rate 4.79%.

OFSI is seeking feedback on this proposed change by email at B.20@osfi-bsif.gc.ca. 

Final amendments to this qualifying rate will be announced by May 24 and new rule will take place on June 1st, 2021.

Please refer to OSFI's website for more details.