Working With a Toronto Mortgage Broker Can Help Home Buyers Navigate Through New Mortgage Regulations
Getting a mortgage is one of the largest investments a person will make in their lifetime. With such a big investment it’s important to ensure that you are getting the right mortgage for you and your budget.
Canada’s mortgage market is full of regulations, including two major changes that came into effect last October. The mortgage qualification rate will now apply to all high-ratio insured mortgages (less than 20% down payment), including five-year fixed terms and insured low-ratio mortgages. Also, regulators have made a wide range of mortgages impossible to be insured such as mortgages for rental properties and properties with purchase price over $1,000,000 at the time the loans are approved.
These changes have had an immediate impact on country’s real estate market, especially here in Ontario. It’s estimated that nearly half of Ontario’s first-time home buyers say they will delay their home purchase directly because of the new regulations. The increased regulations are also causing some borrowers to utilize other financing options to qualify for the mortgage they need.
The government’s new mortgage regulations now require home buyers with less than a 20 percent downpayment to now prove they can afford their payments at the BoC benchmark rate (currently at 4.64%). According to a recent Ipsos poll conducted for the Ontario Real Estate Association (OREA), this has caused approximately 45 percent of first-time home buyers in Ontario to delay their purchase.
“It’s important to remember who’s being affected by measures that curb housing demand–a young family looking for more space, [or] a 20-something trying to get out of his parents’ basement…,” said OREA CEO Tim Hudak. “Rather than focusing on policies aimed at curbing demand, let’s consider boosting the housing supply or enforcing measures that make home ownership more affordable…”
Overall, the new regulations are causing a shift in the Toronto real estate market, by impacting the plans of 79 percent of potential home buyers. The Ipsos poll found that 27 percent of people are now wanting to save for a larger down payment, 34 percent of people are looking for a less expensive home and 22 percent of people are looking for a home in a less desirable city.
As a way to work around these new regulations and provide more options to their clients, many mortgage brokers are directing borrowers to the so-called shadow lending market. This is a term given to the lending market powered by private investment.
For example, Canada’s largest a sub-prime mortgage lender, Home Trust now sells a product that bundles a traditional mortgage with a second loan from private lenders. This has proven to be a popular solution for many borrowers by enabling them to borrow up to 85 percent of a property’s value.
Being able to put down a 20 percent down payment is challenging for many people, especially for first-time home buyers. Many borrowers are now turning to unregulated private loans to make the higher payment. This ultimately makes the home more expensive with Toronto private second mortgages typically having interest rates between seven to ten percent.
“It pushes Canadians into private second mortgages, and it’s just costing more and more money for these people,” said a Toronto broker, who has arranged such deals in the past and expects to see more under the new rules.
Debt counselors from across the country are voicing their concerns about Canadians seeking the help of private loans when purchasing a new home.
“They are going to turn to these unconventional lenders and pay higher prices and it’s not just going to be a higher price for one year, it could be a higher price for three, four, five years,” said Scott Hannah, chief executive of Canada’s Credit Counseling Society, a charity that advises people on debt.
“They want to get into the market, in some cases at any cost, and the cost is going to be a very high mortgage payment.”
Working with a mortgage broker allows you the ability to have an experienced mortgage professional in your corner. They provide their services for free to the borrowers, only making money from the lender once the mortgage is approved. An experienced Toronto mortgage broker will negotiate the best available terms and rates on your behalf and will typically work with dozens of lenders.
People with less than perfect credit or a lower income can sometimes benefit from a mortgage broker navigating through the approval process on their behalf. Also, they will typically be able to get better mortgage rates. Remember, a mortgage broker is not tied to any particular lender, so they can negotiate the best deal on the applicant’s behalf.
At Tanner Financial Services we specialize in working with Toronto families find the perfect mortgage for them. We work with more than 30 mortgage lenders and leverage these connections to find the perfect product for you. We work with both traditional banks and discount lenders.
We specialize in the following mortgage products and services:
- Self-employed mortgages
- New to Canada mortgages
- First-time Home Buyer mortgages
- Equity Based mortgages
- Mortgages for investment properties or investments
- Mortgages for vacation properties
- Secured line of credit (HELOC) to provide quick access to cash
- Mortgage Protection
As experienced independent mortgage consultants, we can help you sift through a broad range of products and options. We’re dedicated mortgage advisors and we are experts on the latest mortgage regulations and will guide you through the entire process. We can also provide you with individually owned insurance products that will protect your mortgage.
Also, we take pride in offering an integrated approach that not only satisfies your mortgage needs but also addresses all of your finances. Our goal is to listen to you and be your partner in planning for both today and the future.
Want to learn more about getting approved for a mortgage and the latest mortgage regulations? Contact us today and one of our experienced mortgage brokers will be more than happy to assist you.