Vancouver Mortgage Financing Advice

I recently came across an article by Vancouver-based mortgage broker, Marci Deane, and felt the points she discusses are important ones to share. Issues with mortgage financing are the number one reason real estate deals collapse. When it comes to financing your next home purchase, you’ll want to keep the information Marci has shared in mind.

Don’t Assume Anything!

Contributed by Marci Deane

A lot of people get into hot water when they assume that because they’ve qualified for a mortgage in the past, they will qualify for a mortgage in the future. This article has one point to make and it’s this: Don’t assume anything when dealing with mortgage financing!  

And if that’s all you take away, that’s enough!

Just because you’ve qualified for a mortgage in the past, doesn’t mean you will qualify for a mortgage in the future, even if your financial situation has remained the same or gotten better. The truth is, things have changed over the last year, and securing mortgage financing is more difficult now than it has been in recent memory.

Today, there is speculation (and strong hints from OFSI – the Office of the Superintendent of Financial Institutions) that, this Fall, we will see more changes coming for all mortgage borrowers in Canada. The latest changes to mortgage qualification (Fall 2016) by the federal government left Canadians qualifying for about 20-25% less. On top of that, a lot of the “common sense” guidelines that lenders previously used in determining your borrowing suitability have been replaced with non-negotiable hard and fast rules.

The biggest change has been the introduction of the Benchmark Rate for qualifying ALL high-ratio mortgages when the down payment is less than 20% of the purchase price. The proposed changes for this Fall could see this Benchmark rate being used for every mortgage application, regardless of down payment.

As an example: Today’s five year rate is around 3%. Before the benchmark rate, a family with $125K in annual household income would qualify for a mortgage of around $750,000 (assumes a 25 year amortization and NO other monthly debts). With the introduction of the Benchmark rate, this same family now qualifies for a $620,000 mortgage. That’s a 17% decrease. The current Benchmark rate is 4.84%. Without getting too technical, these above calculations take into account mortgage, heat, and property taxes as a percentage of gross family income. These calculations will also be used for mortgage refinance applications, meaning a borrower might qualify for less than they already owe!

As a mortgage professional who arranges financing for clients everyday, I keep up to date with the latest changes in the mortgage world, understand lender products, and have my fingers on the pulse of what is going on. From experience, I can tell you that having a plan is crucial to a successful mortgage application. Making assumptions about your qualification, or just “winging it”, is a recipe for disaster. In many Lower Mainland neighbourhoods, properties continue to move quickly from listing to sale. It is more important than ever to do your “mortgage homework” before you start visiting Open Houses!

If you are thinking about buying a property or tapping into your existing equity, I would love to talk with you about all your options, and help you put together a plan.

Marci Deane – Mortgage Broker
604-816- 8950