An existing client with an uninsured mortgage due for renewal is seeking to switch lenders to obtain a more competitive rate. Their original mortgage was approved before the introduction of the B-20 stress test for uninsured mortgages. Their current contractual interest rate is 4.00%. The new lender's offered rate is 3.80%, and the minimum qualifying rate for uninsured mortgages is set at 5.25%. How will the B-20 stress test apply to this client's application for a new mortgage with the different lender?

Question: An existing client with an uninsured mortgage due for renewal is seeking to switch lenders to obtain a more competitive rate. Their original mortgage was approved before the introduction of the B-20 stress test for uninsured mortgages. Their current contractual interest rate is 4.00%. The new lender's offered rate is 3.80%, and the minimum qualifying rate for uninsured mortgages is set at 5.25%. How will the B-20 stress test apply to this client's application for a new mortgage with the different lender?

Answer options:

• The client will be exempt from the stress test as they are an existing homeowner simply renewing their mortgage, irrespective of the lender switch. ✅ The client will be subject to the full stress test, requiring qualification at the greater of 3.80% + 2% or 5.25%, because it's a new mortgage with a different lender.
• The client will qualify at the new contractual rate of 3.80% because they are transferring an uninsured mortgage that was originated before the B-20 rules.
• The client will only be stress-tested if their loan-to-value ratio exceeds 80% with the new lender, as it's an uninsured mortgage transfer.

Correct answer: The client will be subject to the full stress test, requiring qualification at the greater of 3.80% + 2% or 5.25%, because it's a new mortgage with a different lender.

Explanation: While renewals with the same lender may be exempt from the stress test, OSFI Guideline B-20 clearly states that a new mortgage application, even for an existing homeowner switching lenders, is subject to the full stress test rules. Therefore, the client must qualify at the greater of the contractual rate plus 2% or 5.25%.