Higher Rates & More Restrictions On Home Equity Mortgages
As of November 30th, 2016, further mortgage regulatory changes will take place that affects low-ratio borrowers. This is the second Canadian rule change this year – the first raised the bar for qualifying rates (a “stress test”) for high-ratio borrowers over 80% LTV. If you need to catch up, you can read about it here.
Canada Mortgage and Housing Company (CMHC) is the regulatory body and primary mortgage insurer of traditional lending institutions such the Big 5 banks and credit unions. Insured mortgages are backed by the federal government, and when properly underwritten, they are an extremely safe investment for the lender. For low-ratio mortgages (65% LTV), mortgage insurance was extremely low because the risk of the property value being below the mortgage balance in practically all Canadian locations is minimal.
Insured mortgages are backed by the federal government, and when properly underwritten, they are an extremely safe investment for the lender.
Despite this, CMHC is now going to treat low-ratio mortgage holders the same as those with less equity in their homes by tightening underwriting guidelines, as well as hiking mortgage insurance rates. This will reflect in the lending institution’s pricing, meaning rate hikes all around. Borrowers looking to refinance, with stated-income, a rental property or a mortgage over $1,000,000 will now face further difficulty qualifying with the banks.
There’s still good news…
It’s true that tens of thousands more borrowers will no longer qualify with traditional lending institutions. The good news is that Matrix Mortgage Global will not be affected by these changes. We have built our base of business around private lending, and have sole discretionary influence over approvals. We stick to common-sense lending guidelines and true equity lending principals. For us, it’s just business as usual.