Lessons to be Learned by the Canadian Banks

“Risk-Off” in the Canadian Mortgage Market

“There is a false comfort in loan-to-values.” It’s often better to have more room to service debt, than more equity, said the above source. “If I’m choosing between an 80% LTV with a 42% TDS and a 95% LTV with a 30% TDS, I’ll take the latter.”

This is was an expensive lesson the American banks learned (and have probably since forgotten) . . . it's about credit-worthiness, not Loan To Value or even downpayment. I've been seeing a lot of anecdotes of about friends/relatives getting approved in Canada for very high loan to income ratio mortgages based on large downpayments (20-30%). If this is more than a handful of cases, it is going to come back to bite the banks in the behind.