Alberta mortgage rules: limited recourse, credit unions and the stress test
Under Alberta's Law of Property Act, when an individual's conventional mortgage goes into default the lender's claim is generally limited to the land; it cannot sue on the borrower's promise to pay. That protection does not apply to insured high-ratio mortgages (under 20% down) or to mortgages given by corporations, and a borrower cannot waive it.
Limited recourse (s. 40)
Section 40 of the Law of Property Act says that in an action on a mortgage of land, the lender's right is restricted to the land, and no action lies on the borrower's covenant to pay. Section 40(5) makes any waiver of that protection void as against public policy.
Consolidated text current as of December 15, 2022; check for later amendments before relying on it. Source: Alberta King's Printer, Law of Property Act, RSA 2000, c L-7 (ss. 40, 43), effective December 15, 2022. Checked .The exceptions (s. 43)
- Insured high-ratio mortgages: section 43(4.1) says the protection doesn't apply to a high-ratio mortgage as defined in the regulations, which covers loans insured under the National Housing Act or by a licensed mortgage insurer.
- Corporations: section 43(1) excludes mortgages given by a corporation.
What it means when you choose a down payment
With 20% or more down (a conventional mortgage), an individual's exposure is generally limited to the home. With less than 20% down your mortgage is insured, and if a sale after default doesn't cover the debt, the shortfall can be pursued. That's a reason to keep a cushion of equity, not a reason to borrow more than you can carry. Insured mortgages do get lower rates:
On Nov 2, 2026 the lowest 5-year fixed collected from lenders that lend in Alberta was 4.34% insured vs 4.59% with 20%+ down. On a $450,000 mortgage that gap is $5,386 of interest over five years.
Credit unions and ATB
Alberta credit unions are provincially regulated and their deposits are guaranteed by the Credit Union Deposit Guarantee Corporation, a provincial corporation established under the Credit Union Act. ATB Financial, founded in 1938, also lends only in Alberta. Connect First Credit Union has merged into Servus. Compare them on the credit union page.
Source: Credit Union Deposit Guarantee Corporation (Alberta), FAQ. Checked .The stress test in Alberta
Federally regulated lenders qualify you at the greater of your rate + 2 points or 5.25%: 6.34% at today's lowest insured 5-year rate in Alberta. Insured mortgages follow the same test under federal insurance rules. At renewal, an uninsured straight switch to another federally regulated lender doesn't need the stress test (OSFI, since November 21, 2024). Insured borrowers switching lenders at renewal don't have to requalify (Finance Canada, December 2023), and from December 16, 2024 Finance Canada also removed it for low-ratio straight switches to any lender.
Source: OSFI, OSFI exempts uninsured mortgage straight switches from the prescribed MQR, effective November 21, 2024. Checked .| Owing | $480,000 |
|---|---|
| Sale proceeds | $470,000 |
| Shortfall | $10,000 |
| Conventional mortgage (20%+ down) | lender generally limited to the landLaw of Property Act s. 40 |
| Insured high-ratio mortgage | shortfall can be pursueds. 43(4.1) |
| Who carries the $10,000 | the lender (conventional) or the borrower (insured) |
This is an illustration of how the sections apply, not legal advice; an Alberta lawyer can tell you how they apply to your mortgage.
What this means for you
- With under 20% down: you're insured and get lower rates, but the s. 40 protection doesn't apply.
- Buying through a company: corporations don't get the protection either.
- Renewing: a straight switch to another lender no longer needs the stress test, so shop the Alberta board.
Frequently asked questions
Can a lender sue me for the shortfall after foreclosure in Alberta?
On a conventional (uninsured) mortgage given by an individual, the Law of Property Act generally restricts the lender to the land. On an insured high-ratio mortgage, or one given by a corporation, that protection doesn't apply.
Do I need the stress test to switch lenders at renewal?
Not for a straight switch with no increase in the amount or amortization: OSFI removed it for uninsured switches between federally regulated lenders (November 2024); Finance Canada removed it for insured switches (December 2023) and low-ratio switches to any lender (December 2024).
Primary sources
- Alberta King's Printer — Law of Property Act, RSA 2000, c L-7 (ss. 40, 43) (effective December 15, 2022). Checked .
- Credit Union Deposit Guarantee Corporation (Alberta) — FAQ. Checked .
- OSFI — Minimum qualifying rate for uninsured mortgages (effective January 29, 2026). Checked .
- OSFI — OSFI exempts uninsured mortgage straight switches from the prescribed MQR (effective November 21, 2024). Checked .
- Department of Finance Canada — Straight switches and portfolio insurance (December 16, 2024) (effective December 16, 2024). Checked .
- Department of Finance Canada — Statement on the Canadian housing market (insured qualifying rate) (effective December 12, 2023). Checked .