Hard to find any positive news from OSFI’s (Office of the Superintendent of Financial Institutions) new mortgage rules announced last week.
In case you missed it.. It just became harder to qualify for a mortgage. I’m talking about those with more than 20% down payment. Harder than it’s ever been in my 28 yr career. Harder than I think we’ve ever seen in history.
The old rule of mortgage lending was that if you had a large down down payment of 35% or more, and you had good credit, quality real estate, then you were approved. You were guaranteed to get a great mortgage. And rightfully so. You earned that right. You built up significant equity. And the chances of someone defaulting on that mortgage was very slim.
No reason to ask borrowers a long list of questions about their historical earnings, 3 years of income tax returns, Notice of Assessments, blood tests and other bodily fluids (okay, they aren’t asking for bodily fluids or blood.. but it sure feels that way.). Beginning January 1st, 2018, that logic is gone. Banks will have to put you through the toughest mortgage qualifying process that you’ve ever seen.
I’m not the smartest person, but someone has to explain to me why it should be tougher for someone with more than 20% down, even 50% or 70% down payment, to qualify for a mortgage than someone with 5% down? This makes no sense. And there is no logical reason to do this. Discouraging home ownership or real estate ownership is wrong.
THE SILVER LINING
Here’s that silver lining I was talking about..
This new OSFI rule is applicable to all FEDERALLY regulated financial institution… I’m talking about Chartered Banks mainly.. The good news is that Provincially regulated lenders, like most credit unions, are not subject to these changes. At least not for yet. We could see credit unions follow in line or we could see Provincial govts act and change the rules… but that may not happen for some time.
Another item not discussed is maximum amortization. Currently, all hi-ratio (greater than 80% loan to value) or insured mortgages required qualifying using the Bank posted 5 year fixed rate (4.89% today) and a 25 year amortization. Conventional mortgages (less than 80% loan to value) can be qualified at 30 or 35 years. This will increase the amount of mortgage you could potentially qualify for. This is how we are interpreting this as of today. This could change.
WHAT YOU SHOULD YOU
If you are thinking of refinancing in the next 2 years… if you have a renewal coming up in the next 5 months… if you are thinking of buying a home in the next 4 months.. Get yourself a preapproval NOW! Your preapproval will be qualified using today’s rules. This could make the difference between qualifying and not qualifying. You have nothing to lose. Call an experienced Mortgage Broker this week.
Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.
Steve Garganis 416 224 0114 firstname.lastname@example.org
As an industry insider, Steve will share info that the BANKS don't want you to know. Steve has appeared on TV's Global Morning News, CBC's "Our Toronto" and The Real Life TV show. He's also been quoted in several newspapers such as the Globe and Mail, The Toronto Star, The Vancouver Sun, The Star Phoenix, etc.