I have not been too inspired as of late to write – feel there is too much bad news floating around as the rules keep changing and on the broker channel things have gotten a bit challenging. However, in light of the fact that I feel it is my responsibility to keep educating my clients, I am back with another post, I hope you will like.
If you have been living under a rock or ignoring what has been happening as of late – I know I tried – the rules are changing yet again on January 1, 2018.
What does this mean and how does it impact you? Let’s take a look!
If you’re looking to buy or if you are considering refinancing, then you might want to do so before January 1, 2018. Why?
On October 17, the Office of the Superintendent of Financial Institutions (OSFI) released new guidelines for residential mortgage underwriting at all federally regulated financial institutions. Beginning January 1, 2018, a new ‘stress test’ will be applied to all new conventional mortgages – and not just those mortgages that require mortgage insurance (down-payment or equity of less than 20%).
This is not a new subject – if you have been speaking with me, you can hear the frustration in my voice. As a mortgage broker but also a tax-paying citizen, I am frustrated, because the government is impacting my ability to live comfortably and afford the lifestyle I and you pay for, through our taxes. Home ownership has become a privilege rather than a right in this country and that is a huge shame!
October 2016, we saw a shake-up to the industry when the government first started playing with the rules. Through the guise of controlling foreign buyers, it did nothing to impact them, however it definitely impacted us in our buying power and in some cases by 20%. Now looking forward, that will be further impacted again in January, 2018. Regardless if we put 20% down or not, we now have to qualify at the qualifying rate (currently 4.89% + 2%), which is the new stress test. This will impact your ability to qualify!
Whether you are a resident of Canada or even a non-resident (living and working abroad), you are probably wondering how to keep purchasing and/or refinancing when the mortgage rules keep changing like the wind!
Since last October, we have seen massive changes – everything from increased rates, properties that were previously insured are now uninsured and the qualifying rate for everything under the 5-year fixed has risen three times.
So with these massive changes how do you keep up? How do you purchase when the mortgage rules keep changing?
As brokers, we deal with these frustrations every day and the answer unfortunately is not clear!
Recently James, a non-resident from Singapore purchased a property in Toronto. We completed the deal from start to finish in 10 days, which was highly stressful for both the borrower, realtor and mortgage broker – yours truly.
Everyday, I was faced with lender delays, appraisal delays’ and many phone calls back and forth to verify details. It was not clear that we would be able to close and both James and the seller could not extend closing, which led to further stress. James was leaving back to Singapore on July 29th and the sellers were closing on another property on July 30th. Our closing was set for July 27th. Deadlines all around were tight. The only positive was that the realtor already had the status certificate reviewed by the lawyer, before the purchase agreement was signed, which saved us time in the process, enabling me to send that in with the paperwork to the lender.
I realized that it was the lack of explanation on my part that facilitated this occurrence and thought that this example would be a great learning tool for your purchases in Canada.
Guest Post by Yvette Barnes, Real Estate Salesperson at Right at Home Realty
We’ve heard a lot since the Federal and Provincial governments weighed in on the GTA housing market. Has the market cooled? It depends.
Prices soared last November because there were no listings. This April revealed 21,600 new (‘active’) listings – 33.6% more than April 2016. Our ‘active’ listing supply is 3% higher than this time last year. The May statistics verify new listings are about 47% more than the same period in 2016. In 2017, TREB reports a year-over-year growth of 20-25%; March was at 30%. This suggests the market has returned approximately 5% of the price increases gained.
As the summer approaches, I start to get inquiries from Canadian non-resident or expat clients, inquiring about how to purchase properties in Canada.
Many of these clients are Canadian citizens but they are working and living abroad in countries, such as, Dubai, Singapore, Abu Dhabi and England just to name a few countries. Canada, luckily enough is very favourable to foreign investment, and while these clients are not considered foreigners, once they live outside the country for a number of years, and no longer pay taxes at home, they are not considered citizens and thus do not enjoy the same financing benefits for residents of Canada.
Thus, I thought a good primer would be good. Let’s look at a recent example.
As a mortgage broker, I always strive to think out of the box, in order to stay competitive.
With that in mind, over two years ago, I went to the US (specifically Florida) and started making contacts with realtors, other mortgage brokers, lenders and wholesalers, just to name a few.
Once I had my contacts established and verified, meaning I would only work with referral sources that had been verified and could back up their offerings with proper protocols in place, I was then able to hit the Canadian market and start marketing this source of business. It has not been easy and has taken a lot of work but in the end, it has definitely worth it, as I have been assisting countless investors in Canada to invest in both residential and multi-family properties.
January is a time of year that new resolutions get made and also broken! For instance usually try to start some kind of diet or exercise program, only to give up by February.
For those that are looking at their debts – especially after Christmas with higher spending than usual, they may endeavour to start a budget or stick to a budget or even get some help with credit counselling.
For investors, this may be a great time to reflect on the past year’s successes or misses. For instance at the start of the previous year, you may have set a goal to buy 1-4 properties during the year or you may have wished to start lending your money instead of becoming a landlord or you may have started off great only to be brought to a full stop due to the inability to qualify for a mortgage or lack of a down payment.
So what do you do when your credit has suffered, you have credit issues or debt issues and you cannot qualify?
It’s no news that the new mortgage rules have thrown everyone into a tizzy! Not only, are there new rules, but now there is new terminology and a new way of thinking we need to adopt, so I thought it would be a great primer to spell it out in this blog post.
Before November 30, 2016 we would assess a Purchase in terms of Conventional or High Ratio. Now we need to look at a Purchase in terms of Insurable or Un-Insurable. Note all refinances are considered Un-Insurable.