With a new year comes a new mortgage landscape, and the rules have changed! Come Jan 1, 2018, new mortgage rules came into effect that may have a direct impact on what you can do when it comes to your mortgage. These new rules will affect everyone who is thinking about applying for a mortgage, refinancing, or in some cases renewing a mortgage. So let’s break it down!
Mortgage Applications – New rules by Canada’s federal financial regulator mean that mortgage applicants with a down payment of 20 percent or more will now face the same stress test previously introduced in January of 2017 for applicants with a lesser down payment. This means that that the financial institutions must vet all mortgage applications using a minimum qualifying rate that is equal or greater than the Bank of Canada’s five-year benchmark rate, which is currently 5.14 percent, for high ratio insured mortgage, and for conventional mortgage the committed rate plus an additional 2 percentage points. So what does this translate to? This new rule will essentially make it harder to afford the home of your choice, and those who are in the market for a new home may need to settle for less even if they pass the stress test. But how much less? For those looking to stretch their budgets thin, this could mean a price reduction of as much as 20 percent.
Mortgage Renewal – Lenders are not required to apply the same stress test to clients who are looking to renew an existing mortgage, but may do so if they wish. So what if you fail the stress test when renewing your mortgage? Failing the stress test when renewing a mortgage not only exposes you to a higher interest rate, but essentially reduces the amount of options a client has when renewing a mortgage. In this case, the client may be bound to their current mortgage lender at a less than favourable rate, without the ability to shop around.
Mortgage Refinancing – If you are planning on refinancing, you will also need to qualify under the new mortgage stress test rather than your existing contractual mortgage rate. Take the following situation as an example of how the new 2018 mortgage rules affect rates vs those of 2017. When applying for a refinance in 2017 mortgage lenders would only be required vet the refinance value against the current offered mortgage rate. In 2018 however, lenders would be required to take the offered rate, add 200 basis points, or an additional 2%, and vet the refinance value against the sum. Depending on how close one is to their borrowing limit, this could substantially affect the amount of the refinanced loan.
Who’s not affected? – As with all new financial rules, there is generally a transition period to ensure transactions that are currently under way are not affected. If you’ve signed a purchase agreement on a new home before Jan 1, 2018, you are in luck. These new rules won’t affect you as lenders are not required to apply the stress test even if you apply for the mortgage in 2018. If you’ve been pre-approved for a mortgage, some lender will allow you to complete the transaction under the old rules as long as there is no change to your financial status, and no increase in the pre-approved loan amount. For a refinance, as long as it was approved prior to the rule changes, and closes within 120 days it will complete under the old rules. And it goes without saying that if you pass the stress test, then you have nothing to worry about.
Looking to apply for a new mortgage, or make changes to your existing mortgage but are unsure how these new rules affect you? Give us a call at (519) 777-9374 and the team at iMortgageBroker Inc. can guide you through what your mortgage options are.
We all know life can get very busy, and having to deal with additional situations – such as a mortgage – can be very time consuming, stressful and sometimes cumbersome.
Working with the right Mortgage Professional is a significant factor in the outcome of your experience.
Firstly, you need to ensure that you are working with a Professional that is licensed, experienced and has an excellent track record if you want to have a smooth process. Working with someone who checks these off can reduce your time requirements significantly, remove the stress and simplify the process for you.
As a qualified broker for your mortgage in London, Ontario, allow iMortgageBroker to get you the results you need. We can achieve this by shopping your mortgage needs around on your behalf to get the best deals and lowest rates for your specific needs and circumstances. We get the lenders to compete for your business!
At iMortgageBroker Inc., which is a member of Dominion Lending Centres, we pride ourselves on providing excellent service and unbeatable results for our customers and clients. Every person is valued and treated like a VIP – the way you deserved to be treated and cared for, no matter what.
We consider it a pleasure and a privilege to assist you with your real estate mortgage financing needs and to provide you with exceptional service, experienced counsel, the best available financing options, and lowest rates for your mortgage needs.
A Mortgage Broker does all the legwork for you to shop your needs around to all the lenders. This includes dealing with banks, trust companies, credit unions, mortgage corporations and insurance companies to get them to compete for your business. We also educate our clients and will provide you with all the knowledge and information you need so that you can make the best decision that’s going bring the most financial benefit. Most of all, our expert service to you is FREE! A fee may only be discussed and charged for commercial deals and alternative lending solutions for credit and income challenged borrowers.
Are you curious to know why working with a London mortgage broker protects your best interests and is of such great benefit to you for your mortgage needs compared to going to your bank? We put together a Broker vs. Bank below explanation that will answer most of your questions.
Working with a Bank
A bank agent or bank mortgage specialist is a representative of that specific bank. This person has knowledge of that bank’s specific suite of mortgage products, and can only offer one of their own mortgage products to you.
The purpose of the bank as a publicly traded company is to create as much profit for its investors and to generate as much money off consumers and borrowers. How this is done and affects you, you’re probably well aware of, and that’s another discussion of its own.
Banks offer bank posted rates and are only willing to give discounts, called discretionary pricing, to clients on discretion to compete and retain business. The bank representative is motivated by funding ratios, as this is what is required for performance and promotions, and sometimes commissions. Mortgage specialists and bank agents have limited education and training as they operate and function under The Bank Act.
All of these factors limit the borrower’s options, lending solutions, and results, and it may not be to your best interest.
Working with a Mortgage Broker
A mortgage broker works for the client and not for the bank. Brokers have a fiduciary responsibility to care for and look out for the best interest of the borrower. Perhaps the biggest gain with working with a broker is that their service is free of charge, meaning no fee and no cost to the consumer.
Additionally, a mortgage broker has in depth knowledge of their local markets and all the products that different lenders are offering, including banks, trust companies, credit unions, mortgage corporations and insurance companies.
A broker finds the right mortgage product that is best suited for the client’s needs with the best terms, conditions and lowest rates. The purpose of a mortgage broker is to negotiate on the client’s behalf to ensure the best interest of the client is cared for and that they get only the very best mortgage in London, Ontario, for their unique situation.
Furthermore, a broker is client-performance and result-driven, meaning we are highly motivated to perform exceptionally well you. We only get paid by the lender through referral fees and commission-based income after a mortgage funds on closing day.
Most importantly, the successful career of a super mortgage broker in London is very much dependent on positive client reports and reviews, which only happens when a client is happy with the service they received and achieved outstanding results.
If after meeting with your broker you decide that you still prefer to have your bank fund your mortgage, your broker can still do all the legwork for you and have your mortgage funded through your bank. This will originate your bank’s best financing for you upfront.
However, don’t be surprised if you find that your mortgage broker’s discounted rates at your bank are even lower than the best your bank offered you.
If you have any questions regarding a mortgage or which product may be right for you, reach out to us today! We would be more than happy to answer your questions.
We look forward to hearing from you and assisting you!
You’ve found the home of your dreams and you want to buy it. Firstly, congratulations! Secondly, you now need a mortgage in order to act on it.
When it comes to something as big as a mortgage, it’s incredibly important that you work with a professional who can guide you through the process and ensure everything is done the proper way. As a leading London mortgage broker, it is my duty to look after you and ensure you are successful in your mortgage journey.
But how exactly does a mortgage professional work, and how can one help you? I’m glad you asked!
As a qualified professional in London, I am a licensed broker who meets with my clients to learn their personal needs and situation. Once I do that, I compare mortgages and rates from a number of lenders with whom I work with on a daily basis to find the best one that suits you.
Perhaps the biggest difference between a big bank and a Dominion Lending broker in London is that I am not tied to any single bank, meaning I am also not tied to a specific rate or mortgage product. Instead, I have access to several mortgage options and rates where I am able to negotiate to get the most ideal fit for clients. Once I have your application and know your needs, I take your mortgage to the lenders and search for the lowest rates, terms and conditions and come back to you with several options to choose from.
Additionally, a good mortgage broker will be sure to explain the entire process to you, what the terms mean, what you can expect, and will take initiative when it comes to the progress on your mortgage. They can also keep you updated with mortgage rate trends and any potential changes that could be coming.
I believe that no client should be left wondering what the status of their mortgage is, and I make it a priority of mine to keep you as informed as possible on where things are at.
Perhaps the best thing about working with a broker (aside from the personal relationship you can develop) is that they are generally free! Brokers aren’t paid by the clients – we are paid by the lenders once your mortgage is approved.
When looking for a broker, it’s important to speak with the person and get a feel for them to ensure they are someone you can work with and trust. The entire mortgage process can be complex, but a broker can make the journey a hassle-free experience.
If you’d like to learn more about how a London mortgage broker like me can help you find your ideal mortgage, get in touch with me today! I would be happy to speak with you!