With the sudden mortgage changes announcements on Monday, October 5, 2016, came a flood of concerns about the impact of the upcoming changes. In reality, these are just more major changes in the mortgage landscape in Canada. While each change on its own is not completely overwhelming; the combined effect of these changes has significantly impacted the possibility of getting a mortgage. These changes effect home owners in Canada, and Cornwall, in particular.
The major changes that affected most of Cornwall area property owners in the last 8 years are:
- October changes to the qualifying rate on a 5 year fixed mortgage from the actual rate (around 2.69%) to the qualifying posted rate (4.64% at this time) (2016)
- Maximum amortization changes for an insured mortgage from 40 years to 35 years (2008), from 35 years to 30 years (2011) and from 30 years to 25 years (2012)
- Minimum down payment changed from 0 to 5% (2008)
- Changes to documentation and credit score requirements (2008)
- The maximum refinance percentage changed from 85% to 80% (2012)
- Qualifying payment amounts changed on unsecured lines of credit and credit cards to 3% of the balance owing instead of required minimum payment amounts on statements (2013)
- Portfolio (bulk) insurance must now meet the same criteria as those that are high-ratio insured. This change effects obtaining a mortgage for: over 25 year amortization, rental and investment properties, refinances and homes with values greater than $1M. They can no longer be bulk insured. The long term effects have yet to be determined but in the Cornwall area alone, there have already been negative results. (November, 2016)
- New increased capital requirements to be held in reserved for non-bank lender. (January, 2017)
- Increase to CMHC insurance premiums. This is the third increase in three years. (March 17, 2017)
- “Risk sharing” model for lenders to share in losses of insured mortgage claims. (Proposed)
- Implementation of regional-based pricing. (Proposed)
Over the next few weeks, we will go over each of these changes and their effect on your qualification for a mortgage. In the meantime, there is no need to panic but it may be time to evaluate. If you are in the middle of purchasing or refinancing your home, please contact me and we can go over your particular situation to see if the recent changes will affect your ability to get your mortgage.