New mortgage rules, stress tests, and slowing markets have definitely had an impact on home buyers. And there has been an impact on those with existing mortgages who want to refinance, renew or those who want to switch (transfer) lenders to take advantage of a better rate or product.
Despite the challenges, there are solutions. Part of my job as a mortgage broker is to problem solve and help make mortgage financing happen for you, whether on a new home purchase, a refinance or a better alternative at renewal time.
Let’s take a look at renewals. At renewal time, you have the option of increasing your mortgage or keep it the way it is. In the latter case, if you’re happy with your lender, simply renew and move on. However, if you plan to shop for a better rate, change the amortization, or look at refinancing, then you must re-qualify – even with your current lender. Here are a few situations you may encounter:- Switching lenders to take advantage of a better rate. Many lenders will transfer in your mortgage as-is as long as there are no increased risks, meaning no changes in amortization or increases in the amount of the mortgage. But, if your housing expenses or debt servicing ratios increase, then you may not qualify for a new mortgage and may have to stay with your current lender.
- Penalties can be high. If you have a fixed rate that is higher than what’s available today and you’re two years into a five-year mortgage, you may want to break your mortgage and get a new one, but the penalties could be high. We can analyze the situation to see if there is value to paying the penalty.
- New ratios will impact your ability to get approved. The mortgage rules changed the qualifying ratios that traditional lenders use, although recently the benchmark rate has been reduced slightly. That said, if you are carrying a high debt load, you may not qualify.
- Your line of credit and changing your lender. Rules for home equity lines of credit (HELOCS) have changed dramatically. No longer can you borrow up to 80% loan-to-value (LTV). The max amount you can access as a revolving line is 65% LTV. However, some lenders will allow you to transfer in collateral mortgages.
For those purchasing a home or thinking of buying, take a look at the new government initiative introduced this year – a Shared Equity program that could reduce another 5% to your required down payment. In addition, changes to the RRSP Home Buyers Plan allows first time home-buyers to withdraw up to $35,000 -- this is an increase from the previous limit of $25,000.
Program link: https://www.placetocallhome.ca/fthbi/first-time-homebuyer-incentive
There is even better news for everyone - did you know the qualifying rate just went down? The previous rate was 5.34% and is now 5.19% - this means more people could qualify for a mortgage.
Contact me to discuss your options! Each and every client has different needs with different financial goals.
I'm here to find the solutions to make your mortgage financing happen!
902.489.4898
E: glenestabrooks@mortgagegroup.com