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21 Dec

Big Mortgage Changes Jan. 1, 2018. Consumer’s Home Digest December 2017

General

Posted by: Anne Martin

Big Mortgage Changes Jan. 1, 2018

There has been significant press coverage around upcoming changes to mortgage lending rules that will take effect Jan. 1, 2018. These rules will affect many more people than most realize. They will affect people seeking a mortgage most obviously, but they will also affect those with a mortgage in many ways as well. Let’s take a look at some key areas of concern for both groups, those with a mortgage, and those without (but seeking) a mortgage.

What is the impact?

A reduction of 20 per cent-plus in maximum borrowing power for those with a 20 per cent or GREATER down payment. You read that correctly, a big reduction for the group with the bigger down payments.

The Have Nots

You don’t have a mortgage yet, but you have a Pre-Approval, so you think you’re safe with that Pre-Approval…you may be and also you may not be. A select group of lenders have confirmed they will grandfather existing Pre-Approvals under the 2017 lending rules for up to 120 days. However many lenders will not; for them Jan. 1, 2018 is a hard stop on the old lending rules. Still others are already enforcing the new rules. The questions is; what is your lender going to do? Not all lenders have announced their policies yet either.

The best advice; pick up the phone and call your mortgage broker and get an answer from them as to where you stand.

Question#1; Do the new guidelines affect you?

Question#2; If Yes to Q #1 – Is your Pre-Approval going to be grandfathered with the lender that holds it?

The Have’s

You already have your mortgage, so everything is all cool right? Maybe.
Are you thinking of increasing your mortgage amount by even just $1?
Are you thinking of adding on a secured line of credit for even just $1?

And most importantly of all:

Are you thinking of moving your mortgage to a new property in 2018?

To add new money, or to move the mortgage to a new property, will trigger a re-evaluation under the new rules, and many Canadians will not qualify for the very mortgage they currently have if they try to move it to a new property.

Sure your mortgage is most likely portable, but re-qualification could mean a big reduction in the size of it.

Who is safe?

Those who are simply renewing their current balances.

None of these changes impact you if you are renewing your mortgage for the same amount with the same lender. But, before you do that, read the ‘Did You Know’ footnote below, and as always pick up the phone can give me a call before you do anything else.

If you have any questions about refinancing, reducing debt or paying down your mortgage quicker, I’m here to help!


Returning To The
‘A-Side’

Every year Canadian families are caught in unexpected bad circumstances only to find out that in most cases the banks and the credit unions are there (to lend you money) only in the good times, not so much during the bad times.

This is where thousands of families have benefitted over the years from the services of a skilled mortgage broker that has access, as I do, to dozens of different lending solutions including trust companies and private lending corporations. These short-term solutions can help a family bridge the gap through business challenges, employment challenges, health challenges, etc.

The key to taking on these sorts of mortgages is always in having a clear exit strategy, which in some cases may be a simple as a sale deferred to the Spring market. Most times the exit strategy involves cleaning up credit challenges, getting consistent income back in place and moving the mortgage debt back to a mainstream lender. Or as we would say in the business an ‘A-lender’.

The challenge for our clients, and for us as mortgage brokers, over the past few years, arguably over the past nine years, has been the constant tinkering with lending guidelines by the federal government. And the upcoming changes of Jan. 1, 2018 (referenced in the first story above) represent far more than just ‘tinkering’.

This next set of changes are significant, and will effectively move the goal posts well out of reach for many clients currently in ‘B’ or private mortgages. Clients who have made strides in improving their credit or increasing their income will find that the new standards taking effect will put that A-lender mortgage just a little bit out of reach as of the New Year.

There is concern that the new rules will create far more problems than they solve, especially when it seems quite clear to all involved that there are no current problems with mortgage repayment to be solved.

Yet these changes are coming our way fast.

Are you expecting to make a move to the A-Side in 2018?

It just might be worth your time to pick up the phone and call me today.