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?
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.