Mortgage Renewal Changes Coming November 21st
Is your mortgage coming up for renewal soon? If so, this is blog for you.
Earlier in the year, Canada's banking regulator, OSFI, made an announcement that they were going to remove the stress test qualifications for all insured mortgages coming up for renewal.
The purpose behind this was to help increase competition for homeowners so that they are not locked into their existing lender and can shop around with their mortgage broker to find a better interest rate.
This is great news for anybody who is looking to shop around and get a better interest rate, but only for those who purchased the default insurance when they bought their home.
When this announcement was initially made, a lot of questions arised about the uninsured category.
For those who don't know, uninsured means that you put 20% down on your home, you didn't buy the default insurance, and/or you have an amortization over 25 years.
Currently, for mortgage renewals that fall under the uninsured category, they do not qualify to remove the stress test – limiting a homeowners’ ability to shop around to get a better interest rate.
Because they received so much feedback about this, starting on November 21st, uninsured mortgages will now be able to remove the stress test qualifications for their upcoming mortgage renewal so that they can shop around with their mortgage broker and try to get themselves a better interest rate.
This is great news to help encourage competition within the banking industry and ensure homeowners are getting the best options given to them for their upcoming mortgage renewal.
Now, although this rule change is a step in the right direction, there are still some homeowners that are going to fall through with this recent rule change. Specifically, homeowners that are looking to refinance.
Meaning, if you're looking to increase your mortgage amount – for example to consolidate debt or to purchase a second property, whatever that reason is - or if you're looking to change the amortization on your mortgage, then you're going to fall under the refinance category, which means that you'll have to qualify using the stress test which is your interest rate plus 2%.
This could significantly reduce your options when you're out shopping for a new mortgage and prevent you from being able to get the best interest rate available to you.
If you have questions on how these new rule changes are going to affect your upcoming mortgage renewal, feel free to give me a call, or shoot us an email.
Article written by:
Cody Rowe
Senior Mortgage Consultant
Dominion Lending Centres
Modern Mortgage Group
