They say two things are certain, death and taxes; in Canada there is a third certainty that there will be more changes to mortgage rules. These changes will impact all home buyers and owners who need to finance their properties. To understand financing options for conventional borrowers – ask your Mortgage Broker.
In October 2016 the Federal Government announced some significant changes to mortgage rules for high ratio borrowers. Changes for high ratio mortgages took effect Oct 17th. Changes for conventional borrowers took effect Nov 30th. More changes to conventional mortgages (home buyers or owners with more than 20% equity) have been proposed. So now all mortgages regardless of the situation will have to comply with the same rules.
For more details on the past rule changes or the difference between a high ratio mortgage or conventional mortgage click here http://mybcmortgage.ca/financing-options-for-conventional-borrowers-ask-your-mortgage-broker/
The new rules will be established before the end of 2017 and implementation is expected in the first quarter of 2018. The proposed changes will require that all borrowers qualify at a rate 2% above the contract rate to access financing regardless of the loan to value of the mortgage. The borrower won’t pay this rate but it will be used to confirm what they can qualify for. Currently all borrowers with more than 20% down payment or equity can qualify at the contract rate (for example 2.99% for a 5 year fixed). Under the new rules this will no longer be the the case; they will have to qualify at 2% above that rate. In effect this reduces the buying power or access to financing up to 20%.
As a result of the last rule changes we have seen a bigger spread between rates offered by all lenders. We have seen tightening of guidelines by all lenders. The real estate market in Vancouver has remained very competitive so buyers — especially first time home buyers – have been backed into a corner with lower buying power on the financing side while prices continue to rise. At the same time rates have risen over the past year. Moving forward we will see how these changes impact lender pricing on rates and if the rule changes have any significant impact on demand in the market. We all have our own opinions but we have seen a different reality in the market than what has been expected.
As a mortgage broker I will continue to work with the banks, credit unions and mortgage companies so nothing has changed in that regard – business as usual.
As an independent mortgage broker I can access all lending options including 30 and 35 year amortizations. In addition there are solutions for rental property owners, financing options for self-employed people and alternative financing for those borrowers who do not fit within traditional offerings. Now more than ever it is important for consumers to consult with your mortgage broker to review any important aspects of your financial picture, address any concerns and source best solutions.
With more changes to mortgage rules it is important to stay connected with your financing advisor. For assistance with any of your financing needs – ask your Mortgage Broker.