Stressed OUT by the new mortgage stress test?
There has been much talk about the decision of the "Big Six" Canadian banks to raise mortgage rates ahead of the Bank of Canada. Perhaps the decision was made with the thought process of "why delay the inevitable", or perhaps it was the myriad of other factors cited by banking spokespeople. You know the types of reasons they give, like trying to "stay competitive" or "responding to market conditions", which are typically recognized as automated responses often given when large corporations make moves to squeeze as much money out of their clients as possible.
Of course, when it comes to refinancing or securing money to purchase a home, the real kick in the pants isn't the fact that banks are trying to take more money. The strongest fallout being felt is actually coming from the changes to mortgage application rules that came into effect January 1, 2018. These are having a negative affect on consumers in the following ways:
- an increased failure rate of new "stress tests" for homebuyers
- an increase in the threshold hopeful homebuyers must meet to qualify for uninsured mortgages
- increased pressure on homebuyers to place larger down payments on a potential purchase
- increased chance homebuyers will have to settle for smaller houses, or be deterred from buying altogether
- increased risk that growing families won't be able to upsize their homes to meet their changing needs
- removal of buyers from the market that will threaten to have a broader negative impact on overall economy as fewer homes are bought, renovated, and furnished
But what if there was a way to still take advantage of the old rules from pre-January 1, 2018?
Well, there is. Breen Law's experienced and knowledgeable staff have been able to develop a relationship with some key people who share the same goal as us.... to assist our clients with everything they need to be able to live comfortably and with peace-of-mind.
Basically, our trusted and preferred professional partners have the ability to navigate around the new stress test rules by offering non-traditional lending sources that are not governed by the same body as the big banks. Despite what major financial institutions would have you believe, these other funding sources (such as credit unions and private lenders) can offer the EXACT SAME rates as the banks with the same amortization periods. Not to mention that, by following the old rules, they can often grant an approval amount for an average of up to 20% more than the big traditional guys.
What about the increased risk associated with non-traditional lenders?
The thing is, there is actually no increased risk for using a non-bank when securing a mortgage. As the borrower, you are the one who represents the risk to the lender, as they are putting faith in you to pay back the loan.
At one point in time, non-traditional funding would often be called upon only in specific situations, such as to cover shortfalls or in emergencies. However, with how stressed potential homebuyers and the market has become as a result of the new stress testing, these alternative sources should be considered as one of the first options for any would-be homebuyer or anyone looking at refinancing their property.
What's important to you, is important to us
Contact us today to let us know how our trusted partners can help with your real estate funding needs. Don't be restricted by the big banks' rules.