Everything you need to know about the new mortgage rules and what you need to do now!

As many of you are aware, effective January 1st 2018 the new mortgage rules go into effect requiring purchasers to qualify under the new stress test which will be 200 basis points higher than your mortgage rate. This means that you will require more income to close on the same property that you might be currently pre-approved for!

WHAT YOU CAN DO NOW TO PROTECT YOURSELF AGAINST THIS?

Get a firm qualification (sometimes called a commitment), from a Tier 1 lender (one of the major banks). This allows you to qualify under the current mortgage rules and they won┬╣t revisit your application by pulling your credit again when your deals close. This gives you the peace of mind knowing that you can get mortgage regardless of how many other properties you have and any changes to your financial situation. The firm qualification DOES NOT bind or obligate you to take the mortgage at closing. It does obligate the lender to give it to you.

WHAT IS A FIRM QUALIFICATION?

With a firm qualification the lender approving the borrower agrees not to revisit the application again at the time of closing. The qualification is for a specific property but does not hold a rate for you. Any changes in your personal financial situation should not impact the approval.

WHAT ARE THE POTENTIAL DRAWBACKS?

The only potential issue is that once you get a firm approval like this, it is on your record with that bank. For example: If you had a firm approval on a pre-construction condo with “Lender A” and you had a mortgage on your house with “Lender A” when you went to renew the mortgage on your house they would factor the condo into your credit equation. One solution would be to get the approval done with another lender and then there would be no impact with “Lender A”. We are currently getting firm approvals from multiple lenders on our personal portfolios and recommend you do the same.

We work with a top mortgage advisors who are very familiar with firm approval process, if you would us to put you in touch with a representative, please call us at 416.800.9272

As a valued client we encourage you to take advantage of the firm qualification option and protect yourself from the upcoming and future mortgage rule changes. Please feel free to contact us if you have any other questions.

 

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