The Canadian Mortgage Lending Waters Are Becoming Even More Murky.

This is your fair warning to surrender to the idea your Bank might not have all available Mortgage financing options open to you.

(Side Note: I don’t think they did in the first place.  And I think this is even more true now!)

In an effort to shed light on and simplify the new Mortgage rules of today, I also have the understanding some first time home buyers are still unknowing of even simpler Mortgage requirements.

For this reason, the first portion of this post covers the basic Mortgage rules and qualifying standards.  The latter part of this post is more current Mortgage rule changes.

Standard Mortgage Qualifying Information:

Down Payment:

The minimum down payment for a home less than $500K is 5% of the purchase price.  For any purchase amount GREATER than $500K a 10% minimum down payment ONLY on that additional money above $500K is required.

(could you imagine if someone stopped reading the above sentence at the wrong point ;-)

For example, $500K purchase price equals a minimum down payment of $25K ($500K * 5%).

The minimum down payment on a $600K purchase price looks like this:

$500K * 5% = $25K
$100K * 10% = $10K
Total minimum down payment equals $35K

For even more expensive homes, Mortgage down payment requirements are subject to change.  Please consult with specific details.

Employment Income:

Mortgage lenders like permanent, full time salaried or hourly employees with guarantee hours.  To prove this income, two recent pay stubs and a letter of employment suffice.

For any variable income (business for self, non-guaranteed hourly work, part time hours, commission or bonus income) Mortgage lenders require a two year history of this income.

This 2-year proof of income usually comes in the form of viewing the two most recent Notice of Assessment’s (NOA’s).  For simplicity, the Banks take a two year average of the income you paid tax on to use for Mortgage qualifying.

Post Mortgage Rule Change Update:

In today’s Mortgage lending world, there are many MORE NEW variables that need mitigating enroute to advising the terms and conditions of YOUR Mortgage.

In the midst of Mortgage lenders adjusting to their new lending policies, due to Government requirements, some lenders are trickling out slightly different refinance and purchase qualifying rules than other.

The differences in Mortgage lending qualifying criteria I am seeing could mean qualifying for the Mortgage you need or not.

Insured VS Uninsured:

With a down payment of LESS THAN 20% clients purchasing a home are required to pay a one-time Mortgage insurance premium.  The insurance premiums differ based on the percentage of down payment.  A down payment of 20% or more did not have any client paid Mortgage insurance premiums.

Pre-Mortgage rule changes, smaller Mortgage lenders (mono-line Banks) were paying client Mortgage insurance premiums if the down payment was 20% or more.  These lenders would then bundle these Mortgages together, selling them as guaranteed investments because they were insured with a Mortgage insurance company.

Post Mortgage rule change, this bundling option is less available to these Mortgage lenders now.  Without the ability to “back-end” insure Mortgages, some smaller Mortgage lenders do not have access to funds to lend money out at affordable prices (interest rates).  However, many smaller mono-line Mortgage lenders are creating (created) strategic alignments with major Banks to access their balance sheets to lend Mortgage funds.

For example, Street Capital and First National, both mono-line Mortgage lenders, derive a portion of their Mortgage funds from TD Bank.  Merix Financial and Lendwise (mono-line Mortgage lenders) derive a portion of their Mortgage funds from National Bank and RBC Royal Bank.

All of this said …there is now a difference in Mortgage pricing for insured and uninsured Mortgages – from both Banks and Mono-line Mortgage lenders.  The cost of borrowing funds, limited access to Mortgage funds and investor risk appeal have resulted in tiered interest rates.  The availability of different interest rates, for different Mortgage applications is VERY real.  Additionally, the requirement for triple A credit is EVEN more important now as Banks are becoming pickier of their clientele.

What is also very real is the appetite for certain types of Mortgage lending applications Mortgage lenders are even willing to consider (despite the strength of the applicants and over all application).

For example, some lenders are not accepting purchase applications for rental properties.  Some lenders are not accepting applications for home purchase prices over $1M.  Some Mortgage lenders have different down payment requirements for Mortgage’s over certain thresholds.  Some Mortgage lenders have different Mortgage qualifying guidelines than others.

For this reason, please be mindful of first deciding first WHO you’re working with.  To help you feel confident in making the best Mortgage decision for YOU.  To help you with this I have created 7 Mortgage “shopping around” questions.  These questions are designed to ensure you get the best deal today, tomorrow and have a customizable Mortgage strategy for tomorrow.  Email me, requesting your Mortgage shopping around report today!

Conclusion:

Like retailers deploying the “bait-and-switch” sales tactic, to get me into their store only to sell me something else, I think many online Mortgage companies do the same.  As I hope you are learning, there is more to consider in prescribing a Mortgage than simply dangling an interest rate in front of my face.

Thank you in advance for your referrals, testimonials and future business.

Talk soon,

Chad Moore