It is imperative that you connect with us at your earliest convenience to ensure you have the best mortgage strategy to move forward at this time with the impending rule changes. This will affect home purchases as well as refinances and renewals, so if you are planning any of these important decisions in the near future, now is the time to look at doing so.

MORTGAGE TERMS YOU NEED TO KNOW:

• Insured Mortgage / High Ratio Mortgage = Less than 20% down payment
• Non Insured Mortgage / Conventional Mortgage = 20% or greater down payment / equity
• Bank of Canada Rate = the 5 Year Fixed posted rate (currently at 4.89%)
• Contract Rate = the actual rate offered by the lender/FI to the consumer
• Benchmark Rate/Qualifying Rate = Stress Test: Bank of Canada Rate OR Contract Rate +2%, whichever is greater
• LTV (Loan To Value) = the size of a mortgage compared to the value of the property securing the loan

OSFI has implemented three (3) new mortgage rule changes starting January 1st, 2018:

CHANGE 1: QUALIFYING RATE STRESS TEST TO ALL NON INSURED MORTGAGES

Non-insured mortgage consumers (buyers or current owners with a 20% or greater down payment/equity) must now qualify using a new minimum qualifying rate. The minimum rate will be the greater of the five-year benchmark rate published by the Bank of Canada OR the lender contractual mortgage rate +2.0%.

How does this affect the mortgage consumer with a down payment of 20% or more?
The biggest impact will be on the amount in which the homebuyer will be able to qualify. Previously, the homebuyer qualified at the rate offered by the lender. Now, the homebuyer must qualify at the benchmark rate which is the higher of the Bank of Canada Rate (currently at 4.89%) OR the rate from the lender plus 2%. This applies to all terms, fixed and variable rates.

What this means:  If income stays the same and the qualifying rate is now higher, the borrower may qualify for a lower mortgage amount.

STRESS TEST SUMMARY

UNINSURED MORTGAGES
Homebuyers/owners qualify for a mortgage using the benchmark rate, which is the Bank of Canada rate (currently 4.89%) OR the lender rate +2%, whichever is greater.
INSURED MORTGAGES
You must qualify for a mortgage at the Bank of Canada rate (currently at 4.89%).

Change #3: RESTRICTIONS WILL BE PLACED ON CERTAIN LENDING ARRANGEMENTS THAT ARE DESIGNED OR APPEAR DESIGNED TO AVOID LTV LIMITS
Mortgage lenders (excluding credit unions and private lenders) are prohibited from arranging with another lender: a mortgage, or a combination of a mortgage and other lending products, in any form that circumvents the institution’s maximum LTV ratio or other limits in its residential mortgage underwriting policy, or any requirements established by law.  This is often referred to as “bundling” or “bundle partnership”.

What does this mean?
For example: a consumer applies for 80% LTV mortgage and the lender can only approve 65%. The lender then partners with a second lender for the additional 15%. The original lender then “bundles” the 15% LTV mortgage with the original 65% mortgage to form the complete 80% LTV loan. This is no longer permitted.

HOW CAN WINESTONE LAVAL HELP?
Now, more than ever, new homebuyers and existing homeowners are going to rely on professional and ethical Mortgage Advisors for their guidance and expertise in navigating through these regulatory changes, shifting market conditions and uncertainty.  By leveraging the Credit Union Mortgage Program, this increases our ability to help you – qualify for MORE and reduce your cost.

Please contact us to review your options!