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The-Mortgage-Gal

Need a bigger mortgage?

How to qualify for more under the new mortgage rules

With the change of mortgage rules requiring borrowers to qualify at the prescribed or posted interest rate that is approximately two per cent higher than the discounted rates, it time to come up with options for qualifying.  

The change in qualification was designed to "stress test" borrowers. The government wants lenders to ensure that if mortgage rates rise borrowers will be able to make their mortgage payments when they have to renew at a higher interest rate in five years. 

The new rules mean that, on average, a borrower qualifies for about 20 per cent less that they did a month ago.

Here are some strategies to help you qualify for more:

1) Save more down payment. 

  • For every $10,000 down payment you save that will shave approximately $56 off your monthly payments.  
  • Also if you are able to save 10 per cent rather than less than 10 per cent, you will qualify for a lower insurance premium through CMHC, Genworth or Canada Guaranty.  
  • The premium tiers are at five per cent  down — 3.6 per cent  premium, 10 per cent  down — 2.40 per cent  premium  and 15 per cent  down —1.80 per cent  premium added to the mortgage and nothing for 20 per cent down.

2) Pay off some debt. 

  • Some lenders will allow you to use your unused TDS — total debt service ratio of 40 per cent to qualify for a mortgage.  
  • For example, if you have a credit card or line of credit with $10,000 owing the lender is required to use a three per cent or $300 payment in your debt service calculations.  
  • That same $300 will allow you to qualify for another $53,000 in mortgage money.

3) Find a property with a suite. 

  • The lender is allowed to include 50 per cent of the rental income for the suite into your income to qualify you for a mortgage. 
  • If you have a suite that has a market rent of $1,200, that may mean an extra $42,000 in mortgage funds.

4) Get a co-signer. 

  • Some times the purchase of a property may make sense because the borrower is self-employed and makes more money than then show for qualifications or maybe the child has demonstrated that they are able to pay a comparable rent payment.  
  • In these cases, the lender will accept a parent or related person to co-sign the mortgage to allow a larger mortgage payment.

If you have any questions about this or any other aspect of qualifying for a mortgage under the new mortgage rules, please call 250-862-1806 or email me at [email protected].

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About the Author

Laurie Baird and Tracy Head are mortgage brokers with Verico Complete Mortgage Services. Together they have over 45 years of experience in the mortgage industry.

As mortgage brokers, Laurie and Tracy spend time getting to know the people they work with and help them understand the mortgage process. They support their clients before, during, and after a home purchase.

Laurie and Tracy are able to offer their clients advice and options. With access to over 40 different lenders, Laurie and Tracy are able to match the needs of their clients with the right mortgage package. They work closely with their clients to find the right fit, and are around to provide support for years down the road!

Contact them at 250-862-1806 or visit:
http://www.okanaganmortgages.com

Visit Laurie's blog at: https://www.okanaganmortgages.com/blog



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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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