Explainers
Published Date: 05 July 2018

Rules for New Housing Loans

A borrower applying for a loan to purchase a residential property is also required to be the mortgagor of that property. Any person assisting a borrower in servicing a loan is considered a co-borrower.

To ensure that housing loan borrowers do not circumvent loan-to-value (LTV) limits and total debt servicing ratio (TDSR) thresholds, financial institutions (FIs) need to ensure the following requirements are met:

  • A borrower named on a residential property loan must also be the mortgagor of that property.
  • If a borrower's TDSR exceeds the threshold, any person standing guarantee for the loan has to be brought in as a co-borrower.

Borrower-Mortgagor Requirement

A borrower named on a residential property loan is required to also be the mortgagor of that property. FIs should verify that the borrower is listed as:

  • A purchaser on that property’s Option to Purchase form.
  • A mortgagor on that property’s Land Titles Act mortgage document.

This requirement applies to any loan for the purchase of residential property in which the OTP was granted on after 29 June 2013, or any re-financing of such a loan.

Note: This requirement does not apply if the housing loan is not secured on the property being financed.

Guarantor-Borrower Requirement

If a borrower is unable to meet the TDSR threshold of 60% on their own, another individual may be brought in to assist them in servicing the loan.

This person will be considered a co-borrower rather than a guarantor, and lower LTV limits will apply to their future housing loan applications.

This requirement applies to:

  • Any loan for the purchase of residential property in which the OTP was granted on after 29 June 2013, or any refinancing of such a loan in certain situations.
  • Any loan otherwise secured by residential property, if the application date was on or after 29 June 2013, or any refinancing of such a loan in certain situations.

Note: For mortgage equity withdrawal loans, the guarantor borrower requirement applies only in certain situations.