The client
A Calgary-area household took a five-year variable mortgage near the bottom of the rate cycle, locking in a deeply discounted contract rate of 1.65%. Five years on, with the term maturing into a materially higher-rate environment, they wanted certainty and asked their mortgage associate to shop a fixed-rate switch to a new lender rather than simply renew variable again.
Original mortgage
$500,000
5-year variable at 1.65%, opened five years ago
Original payment
2,034/mo
25-year amortization at the time
Balance at maturity
$430,000
Per the lender’s payout statement
New lender’s offer
5.79% fixed, 5-year
20 years remaining amortization
Household income
9,500/mo
Car loan 600/mo
Structure
Uninsured straight switch
No increase in loan amount or amortization
The problem
Switching lenders at renewal has, in the recent past, meant re-qualifying at the full minimum qualifying rate — the same stress test applied to a brand-new mortgage. Run that way on this file, the numbers looked uncomfortable.
The full-stress-test arithmetic
- ▸Qualifying rate if treated as a standard switch: 7.79% (new contract rate + 2%)
- ▸Payment at the qualifying rate: 3,508/mo
- ▸TDS: 48.0% — above the 44% benchmark most A-lenders use.
The client’s actual payment shock — from 2,034/mo five years ago to 3,012/mo today, a $978 increase — was already the headline number the household had to absorb. Requiring the file to also clear a hypothetical, higher qualifying payment on top of that would have made an already-real rate increase into a qualification problem as well.
The numbers
This is a straight switch: an existing uninsured mortgage moving to a new federally regulated lender at renewal, with no increase in loan amount and no increase in remaining amortization.
| The payment shock, in full | Amount |
|---|---|
| Payment five years ago (at 1.65%, 25-year amortization) | 2,034 |
| Payment today (at 5.79% fixed, 20 years remaining) | 3,012 |
| Payment shock | +$978 |
Effective November 21, 2024, OSFI no longer requires federally regulated lenders to apply the minimum qualifying rate on an uninsured straight switch at renewal, provided the loan amount and remaining amortization don’t increase — lenders must still underwrite using sound B-20 principles, just not the prescribed stress-test rate.
With the exemption vs. without it
| TDS | Full stress test (hypothetical) | Actual, exempt switch |
|---|---|---|
| Qualifying rate applied | 7.79% | 5.79% (contract rate) |
| Monthly payment used | 3,508 | 3,012 |
| TDS | 48.0% ✗ | 42.8% ✓ |
The solution
The mortgage associate structured the switch to fit squarely inside the November 2024 exemption, rather than assuming a switch automatically triggers the stress test.
Confirmed the loan amount would not increase beyond the payout balance and that the new amortization — 20 years remaining — would not exceed what remained on the original schedule.
Placed the file with a federally regulated lender, the exemption’s condition, and underwrote to the actual new payment rather than a hypothetical qualifying-rate payment, while still documenting income and debts to sound B-20 standards.
The outcome
Switched to the new lender at 5.79% fixed, with the qualifying decision made on the real payment, not the stress-tested one. Closing costs at Alberta’s Land Titles Office run on a sliding per-value registration fee rather than a percentage-based transfer tax, so no dollar figure is quoted here — the fee schedule is a different animal entirely from provincial land transfer tax.
The $978 payment increase is real and the household will feel it every month — the exemption changed how the file qualified, not how much it costs to carry.
What to take from this file
- 01A straight switch and a full re-qualification are not the same test. Confirm the loan amount and amortization aren’t increasing before assuming the stress test applies.
- 02Quantify the payment shock in dollars, not just percentage points. A $978/mo increase is the number the household actually budgets against.
- 03The exemption doesn’t remove underwriting — lenders still apply sound B-20 principles to the actual payment; it removes the prescribed stress-test rate specifically.
- 04Alberta’s closing costs are a registration fee, not a transfer tax. Don’t quote a percentage-based figure where none exists.
Sources
Every regulatory figure in this file traces to one of these primary sources. Client details and anything that varies by lender are illustrative, as flagged below.
- ▸OSFI — Minimum qualifying rate for uninsured mortgages — the minimum qualifying rate — greater of contract rate + 2% or 5.25%.
- ▸OSFI — OSFI exempts uninsured mortgage straight switches from the prescribed MQR and implements portfolio LTI limits — MQR exemption for uninsured straight switches at renewal (from Nov 21, 2024).
- ▸CMHC — CMHC Reviews Underwriting Criteria — GDS 39% / TDS 44% maximums and the 600 credit-score floor for insured files.
- ▸Provincial/territorial mortgage-broker legislation fetched directly (bclaws.gov.bc.ca, legisquebec.gouv.qc.ca, fcaa.gov.sk.ca, web2.gov.mb.ca, nslegislature.ca, assembly.nl.ca) plus FCNB's own site for NB and CanLII's index for PE — see notes for per-province method — provincial mortgage regulators and licence titles.
Illustrative in this file — lender-specific, not rules:
- ▸1.65% original variable rate and 5.79% new fixed rate — rates move daily; neither is a quote.
- ▸20-year remaining amortization — a straight switch cannot increase amortization, but the exact remaining term is file-specific.
Authority & provenance
How this case file was built
We publish the origin, the verification method and the reviewer for every case file, so you can judge how far to trust it before you rely on it with a client.
Where it comes from
Derived from files handled by Treadstone’s fulfillment desk and from scenarios contributed by partner brokerages. Names, employers, exact amounts and dates are changed so no client or file is identifiable.
Provenance: Composite — a pattern seen repeatedly on fulfilled files, not a single transaction.
What is verified
Every regulatory figure traces to a primary source listed above and was checked against it on the date shown. The arithmetic is recomputed by machine on every rebuild.
Anything that varies by lender is labelled illustrative rather than stated as a rule.
Who reviewed it
Reviewed for Canadian regulatory accuracy before publication, and re-checked whenever a cited rule changes.
Reviewed by: Nicholas Parson, Treadstone Associates — reviews every case file before publication.
This case file is professional reference material for licensed mortgage professionals. It is not advice to a borrower, and it is not a lender commitment. Insurer rules, qualifying rates and provincial taxes change — confirm the current position with the insurer, regulator or lender before you rely on any figure here in a live file.