Recent Mortgage Rule Changes In Ontario
Keeping up to date with the new mortgage rules in Ontario can be challenging, but thankfully our mortgage experts in The House Team share everything you need to know regarding your mortgage needs.
There had been speculation that the government would act to cool the hot housing market, however the industry saw only modest measures in the April 19th federal budget. A national annual tax on foreign-owned properties that are left vacant or under-occupied was announced, which will take effect in 2022. This will only apply to "non-residents" to discourage offshore buyers.
New Stress Test
The budget referenced the recent announcement by the Office of the Superintendent of Financial Institutions (OSFI), which is proposing a new stress test rate for uninsured mortgages of 5.25%, effective June 1st.
This is higher than the current 4.79% and, going forward, will no longer be based on bank posted rates. It will be set a minimum of once per year by OSFI.
What is the stress test?
When getting a new mortgage, lenders must ensure that you pass a stress test, which means that you can handle payments at a certain qualifying rate. This is not the same rate as your actual contract rate, it's for mortgage qualifying only.
Why June 1st Matters
Uninsured mortgages (i.e. when you have more than 20% equity) approved before June 1st are not subject to this tougher stress test, so qualifying will be slightly easier.
This applies to purchases that close after June 1st with a signed purchase and sale agreement. As a result, if you are thinking of refinancing in order to get a lower rate, for debt consolidation or a purchase with more than 20% down, it's a good idea to get in touch with our mortgage team so we can discuss your situation in depth.
What about high-ratio mortgages (i.e. less than 20% down)?
This stress test has not changed but it is certainly possible that it may also become slightly tougher at some point. If you are looking to purchase, get a pre-approval so you are house shopping within your budget and have rate protection.
It's important to purchase when you are financially ready and not be driven by market conditions.
The House Team is here to help! If you have questions about your mortgage, whether existent or upcoming, please let me know!
Contact Our Office at (866) 559-5016!
8 Tips You Won't Get From Your Bank
If you’ve got a mortgage – or plan to get one this year – you probably know that it’s more complicated than it used to be just a few short years ago. That said, I have many tips and strategies that can help you get the mortgage you need, tweak the one you have, or help you plan for renewal. Here are my top eight:
ONE: To get the best deal, you need options. When you go to your bank, you’re talking to one lender. Their best deal might not be THE best deal. It’s also difficult to qualify at a bank if you are self-employed, have past credit issues or finding the stress test a challenge. Credit unions, alternative and private lenders are increasingly helping people get into new homes or refinance their mortgage.
TWO: Best-rate quotes are often meaningless. Mortgage rule changes have thrown mortgage pricing up in the air. Your actual rate depends on a whole slate of factors, which is why you can only get an accurate rate quote after an in-depth assessment of your personal situation.
THREE: The devil is in the details. People tend to focus on rate, but you can save thousands by making sure you get a mortgage that has fair penalties, allows you to prepay, and ensures you will also be treated fairly at renewal. Don’t end up paying exorbitant fees, or be forced to take a high rate at renewal.
FOUR: An insured mortgage might be a smart move. If your mortgage is “uninsured” and you want to switch to a new lender for a better rate at renewal, that lender will qualify you using a “stress test”, which may affect your ability to move your mortgage, and giving your lender no incentive to offer you the best rates. It’s possible that you can switch your mortgage to a lower-rate insurable mortgage that has more flexibility.
FIVE: A 30-year amortization can give you wiggle room on cash flow. A longer amortization (20% or more in equity required) allows you to minimize your mortgage payments and free up cash flow for uses like investing, business needs, postsecondary education, maternity leave, home maintenance, or other life situations. You can keep your payments at a shorter amortization and only use this flexibility if the need arises.
SIX: Monitor your credit score. The best rates go to borrowers with the best credit scores. Lenders are also paying closer attention to any warning signals that clients may have trouble paying their mortgage. If your credit slips and your lender feels your risk has increased, you may be offered a higher rate at renewal.
SEVEN: A rental suite can be a sweet mortgage helper. A home with a rental suite could help you buy a single-family home instead of a condo, get you into that neighbourhood you love, or help you offset mortgage payments in the house you’re in so you can become mortgage free sooner or have the freedom to channel money into other areas.
EIGHT: Plug your biggest money leak. If debt is choking your cash flow and you have enough equity in your home, you may be able to move that debt to your lower-rate mortgage and save thousands. Using home equity to pay down debt is one of my specialties!
Make sure your mortgage strategy is working for you and helping you build wealth. Get in touch for a review of your situation.
Book Your Mortgage Appointment Today
Simply put, it’s become a lot more complicated to renew a mortgage in Canada.
Some clients are surprised to discover they don’t qualify for the best rates with their current lender, or that they can’t switch their mortgage to a new lender for a better rate. Our advice? Start preparing early. Here’s why:
New accounting rules called IFRS 9 (IFRS stands for International Financial Reporting Standard) will cause lenders to pay closer attention to any warning signals that clients may have trouble paying their mortgage. As a result, if your lender feels your risk has increased i.e. perhaps your credit score has slipped, they may then offer you a higher rate at renewal, even if you have never missed a payment. Good news – download my MOPOLO app to monitor your credit score monthly!
Do you have an “uninsured mortgage”? If you want to switch to a new lender for a better rate, that new lender will need to qualify you using the new .”stress test”, which may affect your ability to move your mortgage, and giving your lender no incentive to offer you the best rates at renewal. I can help you understand your options. One of the things we’ll look at is whether we can switch your mortgage to a lower-rate insurable mortgage: a move that could offer huge savings over the long term. Not sure if your mortgage is insured or not? I can find that out for you.
Mortgage rate trends. While fixed rates are higher today than they were a year ago, many lenders are offering exceptionally low rates on their variable rate mortgages. In addition to offering the ability to save on interest, a variable mortgage can be significantly less expensive to get out of should you need to.
It’s critical that you work with a mortgage expert who has access to more than 50 different lending options, including credit unions that aren’t subject many of the same rules. So as soon as you hear from your lender about your mortgage renewal, get in touch! Or let’s have a conversation about credit improvement tips or discuss the potential impact of changes in your personal situation like reduced household income.
The Bank of Canada announced today that it is keeping the overnight rate unchanged as they monitor the evolution of NAFTA negotiations and the outlook for inflation.
Household debt levels are improving, the housing market is stabilizing, and business investment and exports are “growing solidly”. The Bank noted that higher rates will be warranted but they “will continue to take a gradual approach.” The next rate-setting day is October 24th.
Get in touch if you have questions about your mortgage plan, or if you need a new mortgage, are renewing, or are looking to refinance for debt consolidation, renovations or other large expenditures. It’s very important to work with an experienced professional who knows the right questions to ask to assess your situation and provide the direction you need to achieve your homeownership goals and save money over the long term. Good advice early saves time and stress!
We regularly receive short-term rate promotions that are not posted online, which means our rates change frequently. Please contact us for these unpublished rate specials.
View current Ontario mortgage rates here: Mortgage Rates