Wednesday, December 7, 2022, Tom Gasparec

click to enlarge


click to enlarge


 

Hi Valued Client,

 

  We communicated last week that new stress test rules for mortgage financing could be confirmed as of June 1st. Its now official! 

Canada’s top banking regulator, the Office of the Superintendent of Financial Institutions (OSFI) has announced that they will be proceeding in implementing proposed change(s) to the mortgage qualifying rules come June 1, 2021.

The minimum qualifying rate for both Insured (mortgages with a downpayment under 20% / backed by a mortgage insurer ie (CMHC/Sagen) and Uninsured mortgages (residential mortgages with a down payment of 20% or more) will become: the mortgage contract rate (the rate offered on your mortgage loan) plus 2% or 5.25% - whichever is greater.

Raising the qualifying rate for potential buyers could result in qualifying for a lower purchase price. It is important to remember however, that this changes does not increase actual costs to borrow, and because the rules apply to all Canadian borrowers, the playing field remains a level one.

The last round of mortgage rule changes (in 2018) introduced the “stress-test” for uninsured mortgages and was preceded by a flurry of last-minute buying. It's anticipated this latest announcement could again spur this type of activity.

The stress-test was implemented as a means of ensuring borrowers do not bite off more than they can chew. It is the metric used to qualify would-be home buyers for a mortgage loan; whereby potential borrowers must demonstrate they have the ability to cover their mortgage payments in the event rates rise much higher than when they apply for the mortgage.

There were rumblings that OSFI was planning to revisit the “stress-test” benchmarks prior to the Covid pandemic. Ben Gully, Assistant Superintendent, Regulation had to say this regarding today's announcement, "In a complicated and sometimes volatile housing market, the need for sound mortgage underwriting cannot be underestimated. The rate in place as of June 1, 2021 will help support financial resilience should economic circumstances change, while our commitment to review the qualifying rate at least annually will contribute to continued confidence in the Canadian financial system."

Qualification Now:

Insured borrowers (those with between a 5.00-19.99% down payment):
These borrowers must qualify at the 5-year benchmark rate; currently sitting at 4.79% and are subject to a Mortgage Default Insurance Premium (aka “CMHC fee”).

Uninsured borrowers (those with 20% or more down payment):
These borrowers are not required to pay a default premium and must qualify at the Bank of Canada benchmark rate (currently 4.79%) or the contract rate + two percentage points; whichever is greater.


Qualification come June 1:

Both Insured and Uninsured mortgages will be required to qualify at the contract rate + 2% or 5.25% (whichever is greater).

If you are concerned with the change to your purchasing power please contact us to run the numbers for you. Chances are the impact will be less than you imagine.

We are committed to providing you with sound advice and continue to have access to numerous lending options. We will look at the whole picture and build a mortgage plan to meet your needs, whether that’s for the home you purchase today, or the one you purchase after June 1.


Your mortgage advisor for life,
 
Tom Gasparec, AMP 
Mortgage Agent
Toll Free: 1 866 492 4024

Friday, May 14, 2021, Tom Gasparec
 

Hi Valued Client,

 

 Although the new mortgage stress test rules for uninsured mortgages (20% down payment or more) has not yet officially been confirmed the June 1st date is fast approaching.  

"A CEO of a prominent industry association says that mortgage professionals should be attuned to another prospect in the coming weeks; that the OSFI announcement could be accompanied by a similar hike in the stress test level on insured mortgages"   (this would be for mortgages with less then 20% Down payment)  

Many lenders are adjusting their underwriting to reflect the rules changes as of June 1st, 2021. 

Here is an example of one of the big five banks:


The Office of the Superintendent of Financial Institutions (OSFI) recently proposed a change to uninsured qualifying rate rules. Upon confirmation, effective June 1, 2021, OSFI will require uninsured mortgages to qualify at the greater of

  • the OSFI-defined five-year minimum qualifying rate (5.25%) or
  • the customer's contract rate + 2%.
    • Example: If the customer's contract rate is 2.29%, their qualifying rate would be the 5.25% OSFI rate, since it's higher than the contract rate + 2%.

 Further updates to OSFI's proposed qualifying rate rules, if any, will be communicated as they become available.
 
What you need to know

  • The impact to the customer of this change is estimated to be up to a 4% reduction in the principal amount, depending on the customer's circumstances.
  • Existing pre-approvals must have a Purchase and Sale Agreement (PSA) signed before June 1, 2021 in order to not have to requalify under the new rate rules.
  • A signed PSA means the offer has been accepted prior to June 1, 2021. There may still be conditions to be waived or fulfilled.
  • For refinances, any new submissions or resubmissions with material changes received on or after June 1, 2021 will be qualified under the new qualifying rate rules.

 
The below table outlines scenarios where a customer would qualify under the pre-June 1st rules or the new rules.
 

  • Pre-June 1st qualifying rate rules: Greater of Bank of Canada benchmark (4.79%) and customer's contract rate + 2%
  • New qualifying rate rules: Greater of OSFI minimum qualifying rate (5.25%) and customer's contract rate + 2%




























 

Scenario

Signed PSA dated before June 1, 2021

No PSA or PSA dated on or after June 1, 2021

Pre-approval or full app started prior to June 1, 2021

Pre-June 1st Rate Rules

New Rate Rules

Pre-approval prior to June 1, 2021 converted to a full app on or after June 1, 2021

Pre-June 1st Rate Rules

Approved application resubmitted with a material change on or after June 1, 2021

New Rate Rules

No application prior to June 1, 2021

New Rate Rules




Your mortgage advisor for life,
 
Tom Gasparec, AMP 
Mortgage Agent
Toll Free: 1 866 492 4024

 
 
 
Disclaimer
The views and opinions expressed in the media, articles or comments on this site are those of the speakers or authors and do not necessarily reflect the views and opinions held by The Mortgage Centre.
The Mortgage Centre does not warrant the accuracy, timeliness or completeness of the information contained on our website or this newsletter.  No advice given,  If you require specific advice for your individual circumstances, consult an appropriate expert directly. Do not rely on the general material of this newsletter or our website. We will endeavour to assist you if you specifically inquire about matters in which we have expertise.

 
 
 
Disclaimer
The views and opinions expressed in the media, articles or comments on this site are those of the speakers or authors and do not necessarily reflect the views and opinions held by The Mortgage Centre.
The Mortgage Centre does not warrant the accuracy, timeliness or completeness of the information contained on our website or this newsletter.  No advice given,  If you require specific advice for your individual circumstances, consult an appropriate expert directly. Do not rely on the general material of this newsletter or our website. We will endeavour to assist you if you specifically inquire about matters in which we have expertise.
Thursday, May 28, 2020, Tom Gasparec
 
Dear  Valued Client,

The hot topic at the virtual water cooler today is what will happen with Canadian Real Estate post Covid-19.

Here a some recently released reports from top analysts with very interesting insights on what we can expect. 

Scotiabank;   "Concerns of a significant adjustment in housing markets appear overblown"

CIBC; "There are clear early signs that the market is starting to warm up."

URBANATION; "GTA New Condo Market Showed Strength Heading into COVID-19"

CBRE; Commerical Real Estate Market Outlook 2020


The sun is starting to shine, we will all get through this together! 

Be Safe!
Your mortgage advisor for life,

Tom Gasparec, AMP 
Mortgage Agent
Toll Free: 1 866 492 4024
 
 
 
Disclaimer
The views and opinions expressed in the media, articles or comments on this site are those of the speakers or authors and do not necessarily reflect the views and opinions held by The Mortgage Centre.
The Mortgage Centre does not warrant the accuracy, timeliness or completeness of the information contained on our website or this newsletter.  No advice given,  If you require specific advice for your individual circumstances, consult an appropriate expert directly. Do not rely on the general material of this newsletter or our website. We will endeavour to assist you if you specifically inquire about matters in which we have expertise.
Friday, May 8, 2020, Tom Gasparec
 
Dear  Valued Client,

We wanted to let all our valued clients know we are here for you in anyway possible during these challenging times. 

We will be reaching out over the coming weeks to answer any questions you have related to your mortgages, real estate and most importantly Covid 19 solutions available to ease and help you through these challenging times. 

We are Covid-19 ready and operational, we restructured to make your experience from start to finish, safe, hassle free as possible while allowing you to remain in the safety of your home. 
Since the middle of March our partners in the Mortgage Finance and Real Estate ecosystems have worked tirelessly to adjust processes with our lenders, realtors, appraisers, lawyers, insurance and financial advisors to make this possible.

NEW SOLUTIONS
  • Some lenders have flexibility to accommodate borrowers who have been laid off temporarily due to Covid-19
     
  • Mortgage Solutions with NO PAYMENT requirements, ever. 
    • These same solutions allow you to take equity out of your home to help loved ones in need  
  • INVESTOR Mortgage Solutions that have NO PAYMENT requirements giving you back some needed cash flow.    
    • These same solutions allow you to take equity out of your investment property to cover off current and future expenses and potential losses
       
  • Alternative Debt solutions
    • We have trusted partners with specialized alternative options to mortgage restructuring that can help you reduce your debt by up to 80%  
 
MORTGAGE PAYMENT DEFERRAL

For many homeowners with mortgages, there's help, but first assess your situation.

If you can pay your mortgage, pay your mortgage. Don't call your mortgage lender if you do not have an immediate issue.  Lenders are inundated with lots of call and need to first help those who will not be able to pay their mortgage.  Check the lender website for possible options.  

If you cannot pay your mortgage, or can only pay a portion, contact your lender immediately. 

This Canada Mortgage & Housing Corporation article  answers your questions on how these deferrals actually work and their options.  

Some positive news; 

Interest rates are slowly declining once again to all time record lows as the volatility in credit markets is reduced. 

This provides opportunities for several thousands of $$$$$ in interest savings when optimizing your current mortgage.


The sun is starting to shine, we will all get through this together! 

Be Safe! 
Your mortgage advisor for life,

Tom Gasparec, AMP 
Mortgage Agent
Toll Free: 1 866 492 4024
 
 
 
Disclaimer
The views and opinions expressed in the media, articles or comments on this site are those of the speakers or authors and do not necessarily reflect the views and opinions held by The Mortgage Centre.
The Mortgage Centre does not warrant the accuracy, timeliness or completeness of the information contained on our website or this newsletter.  No advice given,  If you require specific advice for your individual circumstances, consult an appropriate expert directly. Do not rely on the general material of this newsletter or our website. We will endeavour to assist you if you specifically inquire about matters in which we have expertise.
Wednesday, March 11, 2020, Tom Gasparec
 
Hi Valued Client,

What a roller coaster ride it has been in the last few days.  We spent our whole day and night yesterday calling clients to advise them that rates have decreased again from last week with some great savings opportunities.  
Now just a few hours ago we received a notification from a lender that possibly rates could be increasing again within the next few days.
Wow, get your applications in asap, it could save you thousands! 

Record low Rates in the 2% range.  *some conditions apply for high ratio purchases, insurable switches, renewals and refinances. Rates Subject to change, On Approved credit. 

What is a mortgage optimization??

With a half (0.50) percent decrease in your current rate a mortgage optimization will likely make sense, even with a mortgage penalty charged by your existing lender. All or a portion of this penalty can be built into the optimization with no out of pocket expenses required. 

The mortgage optimization can potentially save you several thousands of dollars to tens of thousands of  $$$ dollars depending on your mortgage balance.  


To debt consolidate or not??
 
Swap out your bad debt for good debt.  Any personal debt obligations you might have are costing you several thousands extra per year in interest. 

See the example below of a client carrying $63,000 in personal credit card and loan debt. 
The illustration is very powerful showing the monthly cash flow savings of $1,527.66, that's $18,331.92 per year and $91,659.60 over 5 years which is more then the personal debt owed.   
The power of a debt swap!   

Your mortgage advisor for life,

Tom Gasparec, AMP 
Mortgage Agent
Toll Free: 1 866 492 4024
 
 
 
Disclaimer
The views and opinions expressed in the media, articles or comments on this site are those of the speakers or authors and do not necessarily reflect the views and opinions held by The Mortgage Centre.
The Mortgage Centre does not warrant the accuracy, timeliness or completeness of the information contained on our website or this newsletter.  No advice given,  If you require specific advice for your individual circumstances, consult an appropriate expert directly. Do not rely on the general material of this newsletter or our website. We will endeavour to assist you if you specifically inquire about matters in which we have expertise.


Monday, March 05, 2020, Tom Gasparec
Hi Valued Client,

                                                             
Here is some great insight from one of our top lenders why the surprise move and change in tone from the Bank of Canada today.  

Also below, see Common Questions from our clients answered regarding the rate decrease.

"At 10am eastern, the Bank of Canada made its second interest rate decision of the year and provided new thoughts on the state of the Canadian economy and the short-term outlook.

Given the emergency actions by the U.S. Federal Reserve yesterday, and the impact of recent stresses on the Canadian economy from the COVID-19 virus and rail blockades, the Bank of Canada’s downward move was not surprising.

To provide context for the Bank’s statement, First National compared today’s pronouncement with the Bank’s previous remarks in January and summarizes the differences here.


Scott McKenzie
Senior Vice President, Residential Mortgages"                                                             


Common questions we fielded today from clients
- When will I see my interest decrease? 
 
Answer;  If you are in a variable rate usually lenders will change their rates within the week or early next week.  Each lender has slightly different policies on how they make this change. 
 
-I have a Fixed rate, will my rate decrease by 0.50% with this announcement? 
 
Answer; No, the Bank of Canada Prime rate directly only affects the adjustable and variable rates.
 
HOWEVER; fixed rates are tied directly to bond yields and investor sentiment. Fixed rates & the associated bond yield movements are a forward looking indicators, meaning they predict central bank rate decision expectations & economic forecasts for the future.
In the recent past weeks fixed rates have decreased based on expectations from the US Fed and Bank of Canada announcements that occurred yesterday and today along with a negative outlook for the economy. 
 
Based on the current revised expectations for the economy going forward it is very likely that we will see future rate decreases for Fixed rates in the coming weeks.

Your mortgage advisor for life,

Tom Gasparec, AMP 
Mortgage Agent
Toll Free: 1 866 492 4024
 
 
 
Disclaimer
The views and opinions expressed in the media, articles or comments on this site are those of the speakers or authors and do not necessarily reflect the views and opinions held by The Mortgage Centre.
The Mortgage Centre does not warrant the accuracy, timeliness or completeness of the information contained on our website or this newsletter.  No advice given,  If you require specific advice for your individual circumstances, consult an appropriate expert directly. Do not rely on the general material of this newsletter or our website. We will endeavour to assist you if you specifically inquire about matters in which we have expertise.
Saturday, February 28, 2020, Tom Gasparec
Hi Valued Client,

                                                             
Finance Minister Bill Morneau announced changes to the method of calculation for the benchmark rate used to determine the minimum qualifying rate (stress test) for insured mortgages.

Instead of the Bank of Canada 5-Year Benchmark Posted Rate, the new benchmark rate will be the weekly median 5-year fixed insured mortgage rate from mortgage insurance applications contract rate, plus 2%. These rates will be published on the Bank of Canada website weekly. These changes will come into effect on April 6, 2020

The current method uses Posted Rates at Canada's big banks which are often much higher than rates being offered in the mortgage market and that gap has widened recently.  You can easily find a fixed-rate insured mortgage for far less than three per cent, for example, even though four of Canada's five biggest banks have a posted rate of 5.19 per cent.
Currently the average insured 5yr Fixed term mortgage is 2.89%.   

Today a borrower would need to qualify at 5.19%. Under the new rules they would be stress tested at 4.89%.
This is a difference of 30 basis points.  It will lower the borrower’s overall debt ratio by about 1% leaving room to qualify for a higher purchase price.

Using an example of a borrower with a yearly income of $100,000 with 10 per cent down payment, today they would qualify for a home value at approximately $511,000. 
Effective April 6, 2020 the same borrower will be able to afford approximately $526,000. This is a $15,000 increase in purchasing power.

This will certainly boost buying power, it's psychologically very positive. 

We would recommend to clients that are currently shopping for a home attempt to purchase their dream home before April 6th date. We expect to see a potential 3 to 6% jump in property prices from the increased demand this will generate.  
Supply is very low, and we are already seeing most of our clients in multiple offer situations in desirable areas.

On a related note, the regulator OFSI is also considering similar changes to the conventional mortgage rate stress test requirements. 

Your mortgage advisor for life,

Tom Gasparec, AMP 
Mortgage Agent
Toll Free: 1 866 492 4024
 
 
 
Disclaimer
The views and opinions expressed in the media, articles or comments on this site are those of the speakers or authors and do not necessarily reflect the views and opinions held by The Mortgage Centre.
The Mortgage Centre does not warrant the accuracy, timeliness or completeness of the information contained on our website or this newsletter.  No advice given,  If you require specific advice for your individual circumstances, consult an appropriate expert directly. Do not rely on the general material of this newsletter or our website. We will endeavour to assist you if you specifically inquire about matters in which we have expertise.