10 Things That Have Changed With Mortgages Since Covid-19
1. Interest rates are going up and down
Fixed rates initially went down but then increased due to the lack of liquidity in the market and perceived risk. Variable rates went down (1.50%) with the Bank of Canada announcements. Lenders then decreased the normal discount (for example, Prime-.60% is now Prime +.20%) for anyone getting a variable rate today. Variable rates are currently lower than fixed and when combined with the fact they come with the lowest potential penalty available (3 months interest), they are once again KING of the market.
2. Mortgages can be deferred for up to 6 months
You can apply online with your lender/bank in under 5 minutes. Banks are quickly approving 6 months of deferral payments with little to no resistance. Non bank lenders are quickly approving 1-2 months using their skip-a-payment feature and on a case by case, approving up to 6 months of deferral payments.
3. Access to mortgage funds is tighter
Lenders/Banks are tightening up due to the unknown right now. More due diligence is being done. More eyes are on each application. They are asking more questions. ie. what sort of liquid funds are available if the client can’t make their mortgage payments.
4. Appraisals are being done digitally
Appraisers aren’t entering properties and instead using digital photos. Lenders are accepting these but the values seem to be coming in a bit lower.
5. More equity for purchases/refinances is required
Some lenders/banks are asking for a higher down payment for purchases. As well, lenders are reducing the allowable equity to be taken out for a refinance. The lenders are insulating themselves in case property values go down.
6. What equity for purchase/refinance is required
Lenders/banks are treating non-essential service industries differently. They are requiring very recent pay stubs and calling all employers to validate you’re still employed. If you’re self-employed, they want a lot more detail about your business, # of employees, current revenue stream, etc.
7. Tougher to buy a rental property
Some lenders/banks are not allowing you to use equity from other properties as a down payment, they require you to use savings instead. They are also requiring more proof of rental income above and beyond just a lease.
8. Lawyers are being picked for you
For refinances, some lenders are only allowing you to use a third party legal service (FNF or FCT) to close the transaction.
9. Stress test put on hold
On April 6th the Minister of Finance was going to lower the qualifying rate used in the current stress test. This would have increased the amount of funds you could borrow. That has now been put on hold and the current qualifying interest rate used remains at 5.04%.
10. This too shall pass
These changes might seem like a lot but I assure you they are temporary. There is so much uncertainty right now, things are changing day by day and we are all adapting on the fly. Things will be back to normal eventually. I’m here to help in any way possible.