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Canada’s mortgage stress test rate drops, third time since pandemic began

Jackie Bowen Uncategorised August 17, 2020

Canadians saw their buying power increase last week when the central bank’s rate fell for the third time this year to 4.79% (from 4.94%), easing a key stress test faced by borrowers.

While most borrowers do not pay anything close to the benchmark posted rate for a mortgage, the rate is used when assessing borrowers as part of a financial stress test.

With this move you’ll be able to qualify for just a little more than you could before.

A family with an annual income of $100,000 and a 10% down payment would have qualified for a home valued at $523,410 under the 4.94% qualifying rate. Under the new qualifying rate of 4.79%, they can now afford $531,230.

If you’d like to know what impact this drop has made on your qualification, please give me us a call.

CMHC tightens requirements for homebuyers

Qualifying for a mortgage is about to get harder for anyone who doesn’t have at least a 20% down payment for the purchase of a home. Canada Mortgage and Housing Corporation (CMHC) is tightening its rules to qualify for an insured mortgage.

Starting July 1st, 2020, CMHC will be implementing the following changes:

  • Establish minimum credit score of 680 for at least one borrower (up from 600)
  • Limiting the Gross/Total Debt Servicing (GDS/TDS) ratios to standard requirements of 35/42
  • Non-traditional sources of down payment that increase indebtedness will no longer be treated as equity for insurance purposes. In other words, buyers will no longer be able to borrow money for a down payment.

CMHC is also suspending refinancing for multi-unit mortgage insurance, unless the money is being used for repairs or reinvestment in housing.

At this time CMHC is the only insurer who has noted the implementation of these changes. So the question remains, will Genworth and Canada Guaranty follow suit or will they continue to be competitive?

Be sure to stay tuned..

Mortgage Deferral Contact Information

Jackie Bowen Education March 20, 2020

As part of extraordinary measures to help customers struggling with the financial impacts of the novel coronavirus pandemic Canadian mortgage lenders will allow mortgage payment deferrals for up to six months.

With the release of this news earlier this week, these lenders have experienced higher than normal call volume and are doing their best to facilitate all calls and are reviewing all applications on a case-by-case basis.

If you are looking to see if a mortgage payment deferral is an option available to you, it’s important to remember that you are officially declaring ‘financial hardship’ to your lender. Some lenders may question how in just one week or so you are already in a position where you are unable to make your mortgage payment so be prepared to support your claim by having the following information/documentation available:

– Have your Mortgage Statement, or mortgage reference number, on hand
– Have your paystubs and T4’s ready
– Have your explanation to the representative ready with details as to how your job is affected by the Covid-19 crisis

Be sure to follow their directions on what you need further to submit and apply for this. And before ending the conversation, be sure to ask them when you should call again to follow up. As it takes a few days to process your request, it’s important to know when you should follow back up on your claim with them.

We cannot process this claim for you as the lender wants to see how the Covid-19 crisis has impacted you directly.

If you need any help on how to apply for this, please let us know and we can help guide you.

Bank Of Canada Drops Key Interest Rate By 1/2 Point

Jackie Bowen Education March 10, 2020

The Bank of Canada doesn’t always follow the U.S. Federal Reserve, but it did last week.

The BoC lowered its target for the overnight rate by 50 basis points to 1¼ percent.

Like the U.S. central bank, Canada’s policy-makers cited the spread of COVID-19 for pulling the trigger on its first interest-rate cut since 2015. It also made sure it was clear to everyone that more stimulus is possible.

“Before the outbreak, the global economy was showing signs of stabilizing,” the Bank of Canada said in a statement. “While Canada’s economy has been operating close to potential with inflation on target, the COVID-19 virus is a material negative shock to the Canadian and global outlooks, and monetary and fiscal authorities are responding.”

The impact on what this announcement makes on the banks and its consumers will be seen in the days to follow.

For more information on the announcement click here.