New Mortgage Lending Rules Got Everyone Like Whaaaaat? Let’s Recap and Simplify!
This week, the mortgage world got hit with some major updates, leaving everyone with a collective, “Whaaaat?!” Don’t worry, I’m here to break it down and simplify the changes, so you can stay ahead of the game without needing a law degree to understand.
1. No More Stress Test for ALL Renewal Mortgages
The big news here is the removal of the stress test when renewing your mortgage. That means for transfers or switches on renewal, you’ll qualify at your contract rate—not some higher, imaginary number. It applies to the same loan amount and same amortization, you’re just moving your mortgage to a new lender.
However, not all lenders might be on board with this change. For instance, one major bank already doesn’t qualify insured switches at the contract rate, even though this rule was announced in October last year. So, just because the Office of the Superintendent of Financial Institutions (OSFI) says it’s good to go, doesn’t mean every lender will jump on board. Keep that in mind!
Effective Date: November 21st
2. Insured Mortgage Cap Increased from $1M to $1.5M
Ready for this? The cap for insured mortgages is jumping from $1 million to $1.5 million. As always, the minimum down payment rules apply: 5% on the first $500K and 10% on everything above that. But here’s where things get murky. Will lenders actually adopt this sliding scale for down payments? Most likely, but let’s not assume anything until we see it in action.
This change will apply to mortgages applied for after December 15th, meaning the first closings under this new rule will likely happen in January.
3. 30-Year Amortizations for First-Time Home Buyers and New Builds (Insured Mortgages)
Alright, this one’s causing the most confusion. Here’s the scoop:
- All First-Time Home Buyers (FTHB) with an insured purchase can now qualify for 30-year amortizations.
- All insured mortgages, even if you’re not a first-time buyer, can have 30-year amortizations if you’re buying new construction.
But, and it’s a big but, there’s more to it. The current 30-year amortizations for new builds (which rolled out in May) come with higher insurance premiums compared to the usual 25-year amortization. We’re still waiting to find out if this premium will stick around for the new 30-year amortization option.
And we’re not done yet! OSFI still needs to clarify what exactly qualifies as “newly constructed” and who counts as a “first-time buyer.” Will they follow the RRSP First-Time Home Buyer’s Plan (FTHBP) rules or go with the previous First-Time Home Buyer Incentive (FTHBI) rules? Does “newly constructed” mean direct from a builder only, or will assignment sales be eligible too? Stay tuned—more details will be coming in the next few months!
Effective Date: December 15th
So, What’s the Takeaway?
Hopefully, this clears things up for you… well, kind of. If things still feel as clear as mud, don’t worry—you’re not alone. As always, it’s a waiting game to see how lenders will respond to these changes, but now at least you’ve got the basics covered.
Got questions or need help navigating your next mortgage move? Reach out, and I’ll be happy to help! Call me at 403.875.2969