You've done your mortgage research online and found a great low rate. Now that you're finally meeting with a broker in person, they're telling you your rate will be higher. You might be disappointed, and you definitely want to know WHY you can't have that great rate.
Recent Regulations Complicate Mortgage Shopping
The mortgage landscape has changed dramatically in the past few months. In addition to the new qualifying rules announced by the federal government, the Office of the Superintendent of Financial Institutions (OSFI) laid out new guidelines for mortgage insurers. OSFI is an independent federal government agency with the role of regulating banks, insurance companies, trust companies, loan companies and pension plans in Canada.
Effectively, the combination of regulations announced at the end of 2016 creates two different branches of mortgages for buyers: insurable mortgages and uninsurable ones.
Where Does Your Situation Fit?
Qualifying for an insurable mortgage – that is, a loan backed by either CMHC, Genworth or Canada Guaranty – is usually a matter of whether you fit into the checkboxes established by the rules. It will depend on your provable income, your debt-service ratio, your credit score, and your down payment. Lenders currently advertise some of their lowest rates for insurable mortgages, and variable rate products are increasingly competitive.
Sounds relatively simple, right? However, if any of the following apply to your situation, you will likely need to be considered for an uninsurable mortgage:
- You are purchasing a home over $1,000,000.00.
- You are self-employed and don't have verifiable/provable income.
- You have rental income that needs to be considered along with your employment income to assist you in qualifying.
- You need to qualify at the actual contract rate rather than the benchmark rate of 4.64% in order to make your debt-service ratio work.
- You need an amortization longer than 25 years.
- You are looking to renew your existing mortgage and need to draw some of the equity out of your home.
Since each lender considers these factors differently, it's a process to figure out where your deal will fit and which option ultimately supports your overall financial situation and goals. In addition to the focus on rates, you should consider the term of the contract as well as any penalties that might be incurred if you need to change your mortgage before the term is complete.
Does that all sound too complicated? While owning a home is a rewarding experience, it's also an important cornerstone in your financial plan. The Auxilium team doesn't simply view a mortgage as debt, but rather an overall piece of the monetary puzzle. Allow us to help you get the best mortgage rate.
Our team stays up-to-date on all of the latest changes to the industry so that we can help you navigate the mortgage process. If you have questions about your specific situation, contact Auxilium Mortgage today to speak with one of our planners: call Toll-Free 1-855-590-6520 or visit us at 307 Goldstream Avenue during regular business hours, Monday through Friday 8:30 a.m. – 5:00 p.m. Our team can also arrange an appointment evenings or weekends to work with you.
Auxilium Mortgage Corporation is based in Victoria, BC and works with clients locally and across Canada. The Auxilium team has over 100 years of combined financial experience and access to dozens of lenders to help you meet your goals.