Our favourite mortgage lender, Sharon Davis at BlueTree Mortgages WEST, has sent information on the new guidelines from the OFSI (Office of the Superintendent of Financial Institutions) for residential mortgage underwriting today. Here it is:
No more bundles – in the alternate space some lenders would do a 1st /2nd type of mortgage to achieve a higher loan to value. Many alternate lenders will only go 65-75% loan to value (LTV) and if buyers needed more – they would “bundle” with another lender to achieve the higher amount. No longer
The highly talked about Stress test is passed – will be the greater of the benchmark (currently 4.89%) or contract rate plus 2.00% to qualify for borrowers with 20% or more skin in the game. It used to be harder to qualify for a variable rate mortgage… as of January 1 – it looks to be the smoothest best way to qualify now!
No more bundles – in the alternate space some lenders would do a 1st /2nd type of mortgage to achieve a higher loan to value. Many alternate lenders will only go 65-75% loan to value (LTV) and if buyers needed more – they would “bundle” with another lender to achieve the higher amount. No longer
And there is a 3rd new rule – which we are awaiting further clarification on… this speaks to lenders having to enhance their LTV measurement and limits according to risk. I think it means that in markets where huge appreciation or opposite has taken place – lenders may be asked to insert their own overriding thresholds with respect to LTV. NEED more clarification for sure… once it comes – I’ll share that too.
These new rules just dropped borrowing power by as much as 20-25%. It is ever more important to ensure your buyers are PRE-QUALIFIED. And for those downsizing – they may assume since their payments will ideally drop they qualify – but do they? I’ve had more than a few clients NOT – and have to pay huge penalties and charges to do what they thought would be better. Make sure your clients are confident in their moves – so you can be too.
New rules effective January 1/2018. http://www.osfi-bsif.gc.ca/Eng/osfi-bsif/med/Pages/B20_dft_nr.aspx
