B20 Mortgage Guidelines

The B20 is a “guideline” published last June by the Office of the Superintendent of Financial Institutions (OSFI). It went into effect on November 1. It is a published guideline laying out principles for “sound residential mortgage underwriting practices”.

The government has implemented the B20 guideline because it is concerned about our debt loads, as you may have heard before. This guideline is now putting their words into action. What does it mean to you and me? It means that on November 1, 2012 it officially became tougher to get a mortgage no matter who you are and what your story is.

Some other highlights are:
• You will need a bare minimum of 5% down payment and can no longer use any cash back arrangement for your down payment.
• You will now only be able to amortize your mortgage for a maximum of 25 years on high-ratio deals.
• You may be required to have appraisals on your property and greater scrutiny will be applied to it’s marketability.
• You will need to qualify for the 5 year bench mark or posted rate if you are applying for a variable rate mortgage or 1-4 year fixed rates.
• You can still get a home equity line of credit but only up to 65% the value of your home.
• If you are self employed your challenges in obtaining purchase financing or refinancing have increased

As the rule changes, more banks will have to turn away more customers. As a mortgage broker, we will look into alternative sources for financing.