New Mortgage Rules make Changing Lenders Difficult

Jeff Evans

I came across this article in the Financial Post today that confirms some of the things I have been writing previously, and makes some interesting points about clients renewing their mortgages, and the handcuffs that the changes have placed on those renewing their mortgages that they qualified for with the looser mortgage rules previously.

One very interesting point to the article was that 78% of mortgage borrowers renew with their current lender. It is my belief that the majority of these borrowers do not find out what the best market rates are when it comes up to renewal time and are paying a much higher rate of interest. It would make sense to renew if you cannot qualify due to a job change or possible equity issues, but I have had a good success rate at getting approvals on those applications, and many times borrowers who are renewing would like to consolidate some debt into their mortgage, which you can still do even high ratio if you have at least minimal equity.

The article also talks about the possibility of home prices decreasing due to the mortgage rule changes. I do find this interesting, and it would be in keeping with what we saw in the autumn of 2008 when they made the last set of major lending changes. However, the humourous part of people is that they didn’t want to buy when the market was going down, and they didn’t want to buy when the market was down, and they wanted to wait until after the olympics when prices were “supposed” to be down. Then, prices go up sharply due to everyone getting into the market at the same time and many people lost an opportunity and in addition have a difficult time finding something that they like because there are so many buyers out there and they cannot find any real deals on a place they would really enjoy living in.

I think if history serves as an indicator of what may be happening, if I were a home buyer and I read in the newspaper that sales are down, that would serve as a green light indicator to BUY! Particularly if the purchase is going to be fairly long term and the intention is to live in the home.

One of the things I like most about what I do is that I have the flexibility and choice to be able to place people in mortgages that the borrowers often wouldn’t be able to get from their bank, and quite often at better rates than their bank would offer. I provide my knowledge and expertise as a value-added service to enable clients to make sound choices when purchasing a home.

If you are renewing your mortgage, you should do so with your eyes open. Call me today or fill out the form below and let’s see what we can do to help you.

Author: Jeff Evans

I am a mortgage broker, hair salon owner, squash player, student, and husband, aspiring to do good for people.

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I have recently completed an e-book and will be launching it soon.  I believe it will be very helpful for not just first-time home buyers, but for anyone who is not as knowledgeable in residential mortgage lending, about how to make your home buyer mortgage broker application appealing to a mortgage lender.

As a sneak preview, here are three tips on improving your mortgage application as a first-time home buyer.

3 Home Buyer Mortgage Broker Tips

  1. Take advantage of the home-buyers plan to fund your down-payment.  This program is not technically ONLY for first-time home buyers, but all first-time home buyers are eligible.  Under the plan, you can borrow up to $25,000 from your RRSP for the purchase of an owner-occupied residence.  If you and your spouse are both applying, then you can withdraw $25,000 each. It is a loan, so it has to be paid back over 15 years (or 1/15th of the loan will be added to income for that year).  However, there is no withholding when you withdraw it, it does not have to all be declared as income on any given year, and you don't even have to use all of it for down-payment!  You can use it for any purpose that you need it for. A good mortgage broker, like myself, can help you with some of the finer details and complex situations that often arise from these situations.
  2. Make sure you pay your bills on time. If you have a high balance on your loan, or you have a lot of debt, those also have a significant negative impact on your credit score, but you can get the bills down and there is no record of your high debt levels.  However, when you miss a bill payment, it stays on your credit bureau for 6-7 YEARS.  This not just negatively impacts your credit score, but lenders look at this when assessing risk, and they have been particularly uncompromising and (unreasonable, paranoid, strict...and other words that I cannot put in print) in the last few years.  While you likely do not have to wait 6-7 years to become bankable if you have had gone through a period of bad credit, the less negative credit on the bureau, the better. At least make the minimum required payments and you will go a long way to making yourself appealing to them.
  3. Having no credit is just as bad as having bad credit. Many people feel that not requiring credit should prove your ability to pay your bills and should be good evidence of credit-worthiness.  This is not how mortgage lenders think.  If you currently do not have any credit, then you do not have any documentation that you are an acceptable credit risk, and no matter how strong your income is, you will have difficulty obtaining a prime mortgage approval.  Make sure you have at least 3 different credit facilities in your name.  (Secondary credit cards in a spouses name are not considered acceptable for establishing your credit).

I am excited to launch my home buyer mortgage broker e-book soon, in which I go into much greater detail and give many different ideas to help home buyers prepare for home ownership, but as a mortgage broker in Vancouver, you are welcome to contact me in the meantime to discuss your circumstances and see if there are any options for you.

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