January 25, 2017
Confused by Your Rate Options?
Don’t worry, you’re not alone. Here is a little insight into why.
Beginning October 2016, the Federal Government started to impose a number of drastic changes on the mortgage industry in Canada and this has resulted in rates being much more complicated and more specific to the borrower.
The biggest impact of all these changes is on Portfolio Insured Mortgages (Info on Insured Mortgages can be found here)
Some of these changes include:
- 5yr fixed terms now have to qualify using Canadas Benchmark Rate vs the actual contract rate. Since the Benchmark Rate is set higher then the contract rate, the amount you can qualify is reduced by approx. 25%
- Refinances are no longer allowed
- Maximum amortization is now 25 years
- The value of the home can not be $1,000,000 or greater (at the original time of purchase)
- The cost of the insurance premiums has gone up substantially, your loan to value and credit score now have a big impact on this cost and in turn your rate.
In order for Big Banks and Monoline Lenders to facilitate borrowers who fall outside of these restrictions, their mortgages must be funded without any Portfolio Insurance. Since Portfolio Insurance is used to help protect a lenders investment allowing them to offer lower rates, funding mortgages without it results in clients having to pay a slightly higher rate.
Prior to these changes, a client may never know if their mortgage is insured or not. Mortgage Rates and options were pretty straight forward allowing you to receive the same rate your friend may have recently received regardless of the differences in your applications.
Now, the rate you receive has to be tailored to your specific situation; purchase or refinance, primary or rental, what your loan to value is, how high your credit score is, etc.
Using a broker has never been more important.
As a savvy consumer you need to ensure you are receiving the best rate for your situation.
We are here to do just that, keeping it simple as we guide you through this process.
Note: Rules and guidelines are subject to change. Please inquire within.