How will the changes in Mortgage Rules impact you, the Borrower?What can you do to help yourself so that you qualify for the best mortgage possible?
Depending on your needs, the new rules in the mortgage marketplace in Canada may impact you. Your Mortgage Broker has access to many lenders, we can help you navigate the options that are available to you and work together to choose the option that is most suitable for you.
For borrowers with less than 20% down payment, the best rates will be available for you. The lenders that will lose business due to the changes will be competing for your business. We will see rate competition here. You put down less money, get a better rate – you pay the insurance fee. Lenders want these mortgages.
For borrowers with a tight budget wanting to renew their mortgage with another lender, if you don’t qualify, you will be forced to take the rate offered to you by your existing lender. This lender has data on you and will use it to determine that rate – they will know that you are not likely to qualify elsewhere, and you should not expect to get a competitive rate.
For borrowers with a tight budget purchasing a home, the ratios used to qualify you will be impacted by the new qualifying rate. This will impact your approval in a material way – you won’t get the mortgage limit you were looking for. You may have to defer your purchase, save for a higher down payment, use a co-signer, earn more income, or buy a less expensive property.
For borrowers wanting to refinance and take equity out of their homes, there will be fewer options and higher rates. There may be a need to look at alternative lenders or banks that do not insure all of their mortgages. Consumers will be turning to unsecured lines of credit, interest only HELOC’s and expensive credit cards. This is costly and the negative consequences can have a long term impact on the borrower. A conversation with me about cashflow planning can be helpful.
For borrowers looking for a mortgage over $1,000,000, fewer options for borrowing means higher rates.
For borrowers looking for financing on a non-owner occupied rental property. Many lender’s programs have already been cancelled. Rate premiums can be .15 – .30 over posted rates and qualifying has rigorous requirements.
For borrowers looking for amortizations greater than 25 years, there will be more restrictions, along with rate premiums.
For borrowers that are self employed and have used alternative ways of proving income used in the past, many lenders have cancelled programs that support small business owners. Insured mortgages for those in business for self are no longer available. If a borrower does not declare enough income to support their application for financing, they will not be approved. Rate premiums will be used.
What can you do to help yourself so that you qualify for the best mortgage possible?
Whether refinancing or buying a new home, to ensure you get the mortgage you want or need, when you need it, start planning now!
Contact me so that we can assess the mortgage strategy that you need and start a conversation about cash flow. Here are a few helpful things that you can do for yourself –
- Keep your unsecured debt under control. This is your credit card and unsecured line of credit debt. It affects both your ability to qualify for the best mortgage and your borrowing limits. Pay it down, Pay it off.
- Protect your credit rating. Always make your payments — at least the minimum payment — and make them on time. Without exception. Keep your balances low and under control — at 60-65% of the overall limits. The amount of credit you have versus how much you utilize impacts your score as well.
- If you are self employed, consider claiming more income on your tax returns. These latest mortgage rule changes are the most significant for self employed individuals who cannot prove their income. Your total income (line 150) on your tax return is an important number that is looked at by lenders. Most lenders are looking for two years of self employment history to qualify you for a mortgage.
- Start a savings account and build up your assets. More than ever the amount of your down payment is an important part of qualifying for a mortgage.
If you would like to discuss the options that are available to you or work with me on a cashflow strategy so that we can prepare for future borrowing needs, please reach out –
I work with clients across Canada, based in Oakville, Ontario with a focus on the GTA / Golden Horseshoe Area.