Mortgage Rule Changes - Update
2017-12-07 | 12:49:13
December 7, 2017
Back in October, yes October, we talked about the announcement of the new Mortgage Rule changes being brought in by OSFI. You can check out my previous blog for that information.
Today I want to bring up some updates. There has been a lot of chatter about how these rules will affect people. Different lenders have different interpretations of the rules and certainly, there will be a lot of getting used to for borrowers and lenders.
If you are looking to buy with less than 20% down, aren't looking to refinance and aren't looking at renewal in the near future - you can stop reading if you'd like. This isn't something you need to worry about at the moment. These rules only affect those looking to refinance their existing home or purchase a home with more than 20% down.
Updates -
Lenders - As with every rule change, Lenders and Banks let us know when the new rule changes will take affect. You may be saying, "Well every report I've seen is saying they take affect January 1, 2018." What really happens is that the lenders must be in compliance by January 1, 2018 on the new rules. Each lender can set their own date, for cut-off. Example: One lender I use indicated last month that they will be cutting off mortgage applications, of all kinds, using the pre January 1 rules - December 15th. That means, if you need to use that lender, you're almost out of time for an approval under the current rules. Many lenders are taking in applications right up until the cut off date. You may want to ensure it's in early, so that they can approve it on time.
NEW UPDATE - December 15, 2017 - As of today, I have official word that we have at least one lender who will accept purchases that are signed and ACCEPTED by all parties before December 31st, 2017. These purchases can still qualify under the current rules (prior to January 1 rules). This includes, new builds that close in 2018 and resale homes. Contact me for more details.
NEW Second Update - December 15, 2017 - As of this afternoon, I now have a lender who has changed how they are doing pre-approvals. It is possible more will follow this path as I have had two updates today. With this lender, any pre approval committed to by the lender prior to January 1, 2018 will remain valid for 120 days from the original pre approval. Any extensions of an expired pre approval after December 31, 2017 must be qualified using the qualifying rate based on the new rules.
Should a pre approval that was committed in 2017 turn into a real deal, the old rules apply even if the closing date of the new purchase is greater than the expiry date of the pre approval, but no greater than 120 days from the date of the commitment for the real deal. EXAMPLE: A Pre approval committed prior to January 1st expires March 15, 2018. The borrowers purchase a property closing May 1, 2017. If the real deal is committed on/before March 15th, this lender will still qualify the deal using the old qualifying rate rule. The rate is no longer protected as the closing is beyond the expiry date of the pre approval, however; the old rules still apply for qualification as long as the deal closes within 120 days. Any changes or revisions to deals committed to prior to January 1, 2018 will need to be requalified under the new rules. Anyone who may be affected by the new rules and wants to buy, should contact me right away for pre approval. 905-377-1684.
Borrowers - Prudence and Patience is key. Lenders are busy while applicants try to get in ahead of the changes. Getting a proper pre-approval right now, is of utmost importance for a purchase. Make sure you have all the information, keep in mind - the new rules take affect January 1 and not every lender is using the same standard for pre-approvals. For refinances, it's much simpler - get it in now if you want a refinance and you may be affected by the new rules. Another thing to consider is that many market analyists are indicating property values may lag for at least the first part of 2018 - which could affect how much you can refinance for, even if the new rules don't directly affect your ability to qualify.
Pre-Approvals - Most lenders have set a cut and dry response to how they are handling pre-approvals for those with more than 20% down. If your mortgage is not approved before January 1st - you're subject to the new rules - REGARDLESS of when your pre-approval expires. Essentially, they'll hold the rate beyond January 1st, you'll just be subject to the new rules. That means, you may qualify for less. EXCEPT - one lender. I have access to one lender who has indicated that they will honour pre-approvals that are submitted and given a pre-approved response - prior to January 1. As mentioned above, be sure to get the proper information about your situation if you're looking to be pre-approved.
Renewals - If you have a renewal coming up in the first half of 2018 - now is the time to look at your options if you may be affected by the new rules. You can get an approval that closes very close to or at your renewal date.
Important: Remember, once your mortgage is approved before the rule changes you'll be able to close, unless you make a significant change to the application.
John Greenlee, Accredited Mortgage Professional
905-377-1684
Cobourg, Ontario - Serving Northumberland and the Surrounding Areas
