WINESTONE LAVAL Mortgages, Insurance and Advisory Services: New Mortgage Rules are Now Here. Here’s How They Impact You!
WINESTONE LAVAL continues to be committed to providing you, our clients, with timely information that affects your mortgage strategy and overall financial well-being.
New mortgage rules were announced last year and are now in full effect. This has resulted in a flood of calls and emails asking about how these changes impact you, as our clients. We have also received very good feedback and live examples of how these changes can really impact the lives of Canadians!
We would like to invite you to schedule a call with us at your earliest convenience to discuss your current mortgage strategy. We want to hear what your 5-year Plan is and help you succeed!
Here is the recap that we sent you previously that explains the rule changes in detail:
There are a number of very important changes that you must be aware of! We are getting a number of calls and emails asking for these rules to be explained, so we have put together this newsletter specifically for you, leveraging our knowledge and expertise. Please share this with anyone who may find it useful. These changes are complex – now is the time to connect with us about your mortgage and financial plans as these new rules WILL affect your ability to qualify for purchases and refinances.
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 implemented 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.
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 that are in effect now!
CHANGE 1: NON-INSURED MORTGAGE CONSUMERS (20% or more down payment/equity) WILL HAVE A NEW MINIMUM QUALIFYING RATE OF EITHER THE FIVE-YEAR BENCHMARK RATE OR THE LENDER’S RATE + 2.0%.
The biggest impact of this will be on the amount in which the homebuyer will be able to qualify. If incomes are the same but the qualifying rate is higher, this may lower the qualifying mortgage amount.
STRESS TEST SUMMARY
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%).
The same stress test applies to refinance clients with the rate +2.0% being used to qualify.
Change #2:LENDERS WILL BE REQUIRED TO ENHANCE THEIR LOAN TO VALUE (LTV) MEASUREMENTS AND LIMITS TO ENSURE RISK RESPONSIVENESS (excluding credit unions and private lenders).
OSFI directs lenders (excluding credit unions and private lenders) to have internal risk management protocols in higher priced markets (sometimes called “hot real estate markets”, like Toronto and Vancouver).
Change #3: RESTRICTIONS WILL BE PLACED ON CERTAIN LENDING ARRANGEMENTS THAT ARE DESIGNED OR APPEAR DESIGNED TO AVOID LTV LIMITS (excluding credit unions and private lenders).
This restricts lenders from “bundling” a combination of mortgages or lending products with other lenders to maximize a client’s LTV.
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.