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Mortgage, this word strikes fear in the hearts of Canadians! Do you understand how the upcoming changes will affect you?
Mortgage Renewal
In past, there wasn’t really much of an effect. It’s likely most institutions would consider you as a client without too much hassle. Not any more. Your mortgage provider may have a lock on you because you don’t meet the new criteria. They don’t want to lose your business and will likely renew your mortgage provided there are no changes.
If there are ANY changes like extending the term or doing some debt consolidation, you must meet the new lending criteria and pass the stress test. You can use online tools like TD’s Affordability Calculator to see if you qualify.
Oh, and by the way, you won’t necessarily get a “preferred client” rate on renewal if they know you won’t be able to move your mortgage!
New Mortgage
In 2017, the rules changed and people with less than 20% down payment had to pass the stress test. Starting January 1, 2018 we all have to qualify. You will have to be able to carry the mortgage if the rates go up 2% from your negotiated rate. You won’t pay that now but you must have the ability to.
It was already tough for people to get into the housing market with the changes in 2017. Now it will be tough for the rest of us to get a new mortgage, whether making changes to existing or maybe considering getting into buying rental units.
I was at a Vogue Simcoe Exclusive Networking meeting last week where Anne Lesperance did a presentation that included a comparison. For example, let’s say a couple was selling their home and wanted to upgrade from $400K to $600K. Under 2017 rules, they would qualify for the $600K mortgage. The same couple would only qualify for $475K under the 2018 rules.
Banks are required to build in “what if” and this can affect how much house you can buy. Make sure you understand how much you can afford when the interest rates go up.
Make it a great day!
Barry
P.S. What am I thankful for today? I’m thankful for snow, gainful employment and teachers like Anne Lesperance. What are you thankful for today?
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