You may have heard about the upcoming mortgage rule changes taking effect January 1st, but do you know how these may affect you?

The Office of the Superintendent of Financial Institutions (OSFI) issued some new guideline changes for the mortgage industry. The changes will go into effect on January 1, 2018, and will require mortgage applicants who need a mortgage representing less than 80% of it’s current market value (i.e. if home is worth $100,000, then your mortgage is < $ 80,000) to qualify at the Bank of Canada’s five-year benchmark rate (presently 4.99% subject to change) or the lender’s five year fixed term mortgage interest rate +2%, whichever is greater.

Here’s an example of the impact the new qualifying rate will have on the maximum mortgage proceeds and home purchase price. Amounts are based upon a combined Canadian family income of $75,000, 5-year closed term mortgage at a fixed> rate of 3.39%, 25-year amortization, $100,000 available for down payment and $700 in other monthly debt obligations:

As you can see, these changes will affect the household that wants to purchase a new home, but they also will apply to anyone that applies for the refinancing of their home as well, for debt consolidation or any other reason!

In addition to this, we envision that changes will occur with regard to the tactics that lenders use for their mortgage renewals as well… Although the new rules stipulate that if you renew with your current lender, these new rules will not be applied to you, we surmise that they will most definitely affect you.

Think of it this way: currently, the Welch & Co Team offers all of our clients free reviews of their renewal offer with their current lender. This is in order to ensure that your current lender is actually offering you a competitive rate in the market place. Lenders are well aware that complacency and busy schedules mean that most households will simply sign the renewal offer from their existing lender. Let’s face it: this is the easiest route!

Right now, if your offer is not competitive, the Welch & Co Team can seek another lender with a more competitive product that offers the right fit for you and your needs. This helps to ensure that lenders make an attempt to remain competitive on rate – keeping them honest!

However, after January 1, 2018, knowing that their existing mortgage holders will now face these tougher rules if they want to go elsewhere at maturity, we surmise that the renewal offers will no longer be offered at competitive rates! Knowing that the easiest route for clients is to just sign their renewal offer from their existing lender without seeking better options. The incentive to offer competitive rates is dramatically reduced…The Welch & Co Team wants to ensure you are renewing to the best possible product to suit your financial needs.

So what can you do about it?

The one thing that you should NOT do, is simply sign your existing renewal offer in fear of not being able to qualify elsewhere! Remember that we are here to assist you and guide you through these mortgage changes, and we have a vast number of lenders from whom we can choose in order to ensure that you are getting what is best for YOU!

Take the time, give the Welch & Co Team a call, let’s talk, and see how we can help!:)