Ian Leverington's Blog

Recently, the Feds (OSFI) announced a new set of lending guidelines for all regulated banks and lenders beginning January 1st, 2018. The worst change for some is the 'stress test' for all borrowers. In October 2016, we saw a similar rule for borrowers with less than 20% down to qualify under a 'stress test'. Now, those with more than 20% down will have to face similar qualifying guidelines as well. These borrowers need to first qualify at the greater of the 5 year benchmark rate (currently 4.99%) or their actual rate + 2.00%. There's only a little bit of time left for borrowers with 20% down or more to qualify at their actual contract rate. The Pros With interest rates on the rise, this actually makes sense as it will help add a level of prevention from borrowers from getting in over their heads. It should also be a somewhat effective measure to help slow the Toronto and Vancouver markets. The Cons All borrowers will qualify for about 21% less. This will cre

So you're ready to purchase a property and you're in a good enough financial position to come up with a 20% down payment (or greater) so you should expect the best interest rates available, right? Though this concept makes sense, it's simply not how the current mortgage market works. Why? Let me explain... In the beginning of 2017, the Office of the Superintendent of Financial Institutions (OSFI) instated new, greater capital requirements for mortgage default insurers to create a larger buffer for future mortgage defaults in an effort to provide more financial stability for Canada's mortgage market. By March 1st, 2017 insurance premiums were increased anywhere from 11% to 126% depending on the loan-to-value/size down payment. Everyone knows that buying a home with less than 20% down requires an insured mortgage and the borrower pays the premium. What most people don't know is that a lot of mortgage lenders (primarily non-bank lenders) still insure mortgages where

One of the most frustrating things I hear about in the mortgage industry is learning about people who have been 'pre-approved' at their bank branch only to find out later they actually can't qualify for a mortgage when the time comes. 'What?! How can that happen?!' you might ask. I'll explain... First, the bank branch (for some very odd reason) doesn't actually review an applicant's credit bureau when they're applying for a mortgage (again, this is odd and I can't imagine why). Instead, only their history as a client with that particular bank is reviewed. Now, even if the bank never cared to check a person's credit bureau before actually providing them a mortgage (which would be silly), an applicant buying a home with less than 20% down (which is most home buyers) also needs to be approved by one of the 3 mortgage default insurers (CMHC, Genworth or Canada Guaranty) who have many strict credit bureau requirements. Again, why they d

News for  you ... Just 8 weeks after the last national rate increase comes another .25% benchmark rate increase by the  Bank of Canada . This is due to the increasing strength of the Canadian economy and this is good news for everyone for a number of reasons but, it also means interest rates for borrows will be increasing again. As I noted 2 months ago regarding the last rate increase in July, you can expect your variable rate mortgage to increase by 1/4 of a percent as well. At this point or at any point in your mortgage term,  you  have the option to opt for a fixed interest  rate  if  you  no longer wish to continue with a variable  rate  mortgage. Your fixed  rate  option will be based on either a new 5 year term or a term that is at least as long as the time remaining on your current agreement (3.5 years left = 4 year term). This will depend on your lender and the interest rates available to 'lock-in' at will depend on what your lender is currently offering for th

News for you... In case you haven't heard already, the Bank of Canada increased their overnight rate by .25% earlier today (up to .75%). The BoC's overnight lending rate is the primary influencer for every major lender's prime interest rate which is what your variable mortgage rate is based on. Each lender will make their own decision on increasing their prime lending rate but, most likely all of them (including yours) will increase their prime rate congruently with the BoC's rate a.k.a. your rate will most likely go up .25%.  At this point or at any point in your mortgage term, you have the option to opt for a fixed interest rate if you no longer wish to continue with a variable rate mortgage. Your fixed rate option will be based on either a new 5 year term or a term that is at least as long as the time remaining on your current term/agreement (3.5 years left = min. 4 year new term). This will depend on your lender and the interest rates available to 'lock

You may have thought that the mortgage rule changes from Ottawa only affect first time home buyers which is understandable because the media sucks at providing the public with the real story. Yes, prospective home buyers qualify for 20% less now than they did prior to October but, the majority of the rule changes have indirectly and directly affected mortgage competition. This is all due to increased costs to the mortgage insurers (CMHC) which is handed off to the lenders which (as you might have guessed) is handed down to you, the consumer. Now, you may be thinking 'but Ian, I already have a mortgage and my rate is set, so why do I care?'. Well, when you need to renew your mortgage in 5 years or whenever your term is due, your lender's new rate offering is going to be higher because of these changes. Of course, I'll help you find a better rate option at that time but, with reduced competition in the mortgage market, you're options could be slim. You may even