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 is to problem solve and help make mortgage financing happen for you, whether a new home purchase, a refi or a better alternative at renewal time.
First, let’s 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.
Now let’s look at home purchases. For those purchasing a home, the government introduced a new initiative – 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 homebuyers to withdraw up to $35,000 -- this is an increase from the previous limit of $25,000.
As mentioned earlier, even better news for everyone is that the qualifying rate just went down, which may mean that more people could qualify for a mortgage.
Cathy McMurrich (403) 568-8817 The Mortgage Group