How to Get Arount the New Mortgage Rules?

The new mortgage rules have essentially lowered the qualifying power of mortgage applicants by approximately 20%. Whether you’re buying and need a mortgage, or are simply refinancing, the qualifying bar just got higher. However, there are still ways to get around these rules, at least for now. Let’s analyze them…

Think local, think mortgage brokers! 

While  the mortgage stress test is a requirement set by OSFI for all federally regulated institutions, mortgage brokers have access to credit unions that are regulated provincially and have not (yet) implemented the test themselves. In other words, business  as usual with them.

Credit unions have always been one of the standard options for mortgage brokers, especially for niche products such as co-op‘s and stated income programs. Now, because of their flexibility and very competitive rates, they are becoming a lender of choice.

If you are looking to switch i.e. transfer your mortgage from one lender to another, without borrowing additional funds, certain banks can still approve you under the old rules, using contract rate versus the stress test.

There are two cases in which this would be allowed. First, if your mortgage is high ratio, i.e. insured (you purchased your property with less than 20% and have not refinanced it since). Second, if your mortgage is grandfathered, meaning it was approved before November 2016 and even though you had 20% down payment and did not pay insurance premium, the lender has internally insured it.

If you are looking to purchase a property and your purchasing power has been decreased, you can always look into the option of getting a gift from immediate family to increase the down payment and in such way deal with the new mortgage rules.

While the gifted, or partially gifted down payment is not something that everyone has access to, those whose parents are in a situation to help, you could potentially sell the gift idea as an early inheritance :).

Finally, there are always private mortgages. While these mortgages are not for everyone and are certainly not a long-term solution because of high interest rates and fees, there are plenty of situations where they make perfect sense. At least for the time being, as there are rumours that they will become regulated as well.

Private mortgages are a great solution for a short period of time, for example for someone looking to renovate a house before going back to their own bank and combining the renovation debt with their existing mortgage. 

Using private funds is also a great solution for someone looking to quickly flip a property. Getting a construction mortgage with a bank is a complicated process for which not many can be approved. 

To discuss your situation or these and other strategies, contact me directly.