Final wave of mortgage rules arrives... where does it leave us?
Finally, after a flurry of changes on Nov 30, mortgage brokers can hopefully get back to normal after nearly every lender made, in some cases, major changes to lending policy.
In a period of 2 days, we had:
- A major bank let go nearly all of their staff for their broker channel underwriting office in a shift to move to a 3rd party underwriting company (much like TD did a year ago, but with WAY less finesse)
- Nearly every major bank announces a cap of 5 properties owned maximum by a client seeking residential financing
- Nearly all banks now charge a premium for rental properties of .25%
- About half the banks now charge a premium for amortizations that exceed 25 years of around .1%
- A total of 25 lenders changed their policy in some way Nov 29 or 30. Minor policy changes include:
- No more refinances for certain smaller non-bank lenders
- No more amortizations over 25 years
- Rate surcharges for loans over $1mil, or simply not doing them
So, where do all the changes leave us? Here are some interesting tidbits.
- Children putting less than 20% down after being on the job for 2 years will probably get a better mortgage than their parents with over 20% equity, of about .1% - .2%
- Clients building a real estate portfolio will now likely need to get commercial financing or use a “B” lender to grow past 5 properties in total. There are some exceptions to this, so feel free to contact me to learn more
- Rates are higher by about .3% due in part to the Trump election which caused an increase in bond yields, which along with policy changes resulted in higher fixed rates
- Less borrowers will be able to shop their renewal to other banks due to tightening bank and government policy, resulting in a lot of extra, unnecessary interest paid for borrowers
The end result is that it will be more difficult to get mortgage financing in general so make sure to buckle down and expect tighter regulations and policy, less exceptions from the bank and definitely a larger mountain of paperwork, regardless of credit history, income or relationship with the bank.
Just thought I’d warn you.