With the formal announcement less than 24 hours old (on the mortgage rule changes that are coming into effect January 1, 2018), we have already seen a flood of questions coming in from realtors and clients alike….So, I thought I would take a moment and share the more common one’s with you:
New “Universal Stress Test” FAQ’s:
- Will the rule changes affect my clients current purchase and mortgage already approved with a bank/lender that is set to close after December 31st?
- NO, it will not affect your client. Banks/lenders will honour and close on all deals already approved and closing within the regular parameters of 120 days from the client’s approval date. Ex. Client’s purchase agreement is signed and dated October 15, 2017, and has a set closing date of January 25, 2018. The new rules will not impact this client.
- Will the rule changes affect my client’s current pre-approval that is already in place with a bank/lender if they do not have an accepted offer on a new home by December 31, 2017?
- YES. If your client does not have an accepted offer dated before January 1st, 2018, they will need to re-qualify under the new guidelines.
- Do the new rules affect our client’s wishing to just renew their mortgage with their existing bank/lender?
- NO. If your client does not require to increase their mortgage(called a “refinance”) and just want to renew their mortgage, the new rules will not impact their ability to do so. BUT, if the lender knows you do not qualify under the new rules they “could” offer you any rate they chose – unfortunately
- Do the rule changes affect a client’s ability to increase their current mortgage (known as a “refinance”)?
- YES. Any change to a client’s mortgage will require them to qualify under the new rules.
- Does it impact clients who have less than 20% down (also known as a “High Ratio” or “CMHC” insured mortgage)
- NO. These clients are bound by the rules that were set last year, which requires us to qualify them under the Bank of Canada “Stress test” rate of 4.89% – (as of today, but could increase at any time and probably will)
- Do these rule changes apply to ALL lending institutions?
- NO. The rules were put in place for all lending institutions that are federally regulated and governed(all banks and trust companies). There are some provincially governed institutions, mainly the credit unions. While credit unions are not federally regulated, it is likely they will adopt the new rules….so while they are not REQUIRED to do so, it is likely they will.
I know these FAQ’s do not answer ALL the questions out there, so please contact me if you have any others, or need further clarifications.
1 Office of the Superintendent of Financial Institutions: OSFI is reinforcing a strong and prudent regulatory regime for residential mortgage underwriting