Mortgage and Refinancing changes

 

Hi Jessica,

On March 26th you will have significantly fewer options to purchase or refinance. A major banks’ “Mortgage for Self-Employed” program will be decommissioned April 1st and the cut-off for submission will be March 26th.

This is due to continuing regulations from the Office of the Superintendent of Financial Institutions (OSFI). Our concern is that if this is an OSFI rule, more lenders may follow and soon it may be much more difficult to obtain financing if you are self employed unless you are willing to work with a “B” lender, who generally have rates that are 1% – 2% higher than banks.

Example –

Jim owns ABC Electronic, the business grosses $750,000 but Jim’s accountant uses write offs to reduce Jim’s net income to $75,000 a year.

With the current rules we are currently able to “state” Jim’s income by adding back certain tax write offs and deductions. In this example we may be able to support an income of $140,000, or a maximum mortgage of roughly $700,000.

As of March 27th we will only be able to gross up Jim’s net income by 15%. This would give a maximum usable income of $86,250, or a maximum mortgage of roughly $400,000.

These changes will lead to a significant drop in most self employed applicants usable income. If you are considering refinancing to access the equity in your home, purchasing a new home to live in, or have a renewal coming up in the next 6 months please call or email the Green Mortgage Team within the next 24 hours as there is not much time left.

Thank you,

Kyle Green and The Green Mortgage Team

The Green Mortgage Team
Ph. 604-229-5515

Kyle@GreenMortgageTeam.ca

The “Stress Test” – How Is This Going to Impact You

Jackie Bowen

 

Dear Clients, Friends and Family,

Over the next few weeks and months ahead, you will hear a lot of commentary on whether the new uninsured ‘stress test’ rules are good or bad for the consumer and necessary or unnecessary for the stability of the mortgage industry in Canada. Without question, you will hear that the sky is falling and that NO one will ever qualify for a mortgage again. My favorite is “the housing market in Canada is going to come crashing down”. With all the challenges, the Canadian mortgage industry has faced since 2007, including one of the worst economic crashes and some of the most significant rule changes to our industry, the housing market has continued to thrive. Although these new changes are significant and will have an impact to the consumer’s borrowing power, we believe the industry in time will adjust as it always does.

Saying all that, the one concern that I have after January 1st, 2018 is that it will become more difficult to qualify for a mortgage and to understand how all the industry changes over the past year affects you, NOW more than ever you need to be working with a mortgage professional. With my experience, knowledge and the variety of mortgage lenders and options I can provide, my services have never been more important. With access to most of the major banks, credit unions, mortgage companies and private lenders, I have the ability to shop the market place to provide you a tailored mortgage solution.

So, what was the biggest change announced? The biggest change to the new rules is surrounding the mortgage qualification and incorporating of a stress test to each mortgage application. Although a similar test was incorporated last year to high ratio mortgages (anyone with less than 20% equity), this new rule now applies to anyone with 20% or more equity in their home (conventional mortgage). Qualification for all conventional and unconventional mortgages will now be calculated at a minimum qualifying rate which is the GREATER of the five-year benchmark rate (currently 4.89%) published by the Bank of Canada or the contractual mortgage rate +2%. So, to put this in perspective, if the 5-year fixed rate is at 3.25%, the lenders are required to qualify your mortgage using payments based on the rate of 5.25% (3.25% + 2.00% = 5.25%). You don’t need to be a mathematician to understand that these changes will drastically effect how much you will qualify for your next mortgage.

If you are concerned about how these changes could affect you now or in the near future or if you are thinking of renovating, consolidating or purchasing an investment property, now is definitely a good time for us to go over your options and review the your current mortgage and future goals.

Please do not hesitate to call me at 604-839-1803 or email me at info@jackiebowen.ca so that we can arrange a time to go over your options.

Sincerely,

Jackie

 

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