8 Changes You Need to Know About Mortgages Since COVID-19

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Today feels like a good day to throw the paper in the trash, but here’s some stuff you should know. No matter what’s going on in the world, we’re here to help find the best options available to you.

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1. Interest rates are volatile

Fixed rates initially decreased but then increased due to possible liquidity (availability of money) issues, and an anticipated increase in borrower risk. Variable rates decreased as Prime rates fell by 1.50% as a result of Bank of Canada announcements. Lenders then slashed the normal discount (for example, Prime – 0.60% is now Prime + 0.10%) for anyone getting a variable rate today. Even with the rate volatility, interest rates are still hovering around +/- 3.00% for 5 year fixed rates, which means they are still near all-time lows.

2. Mortgages can be deferred for up to 6 months

You can apply online with your lender/bank in a few minutes if you have your mortgage statement handy.  Banks are quickly approving 6 months of deferred 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. Lenders are enhancing their due diligence

Lenders/Banks are spending extra time reviewing applicants) due to the unknown right now. More importance is placed on “fallback” (available funds in case of job loss), and lenders are more closely reviewing income sources, and in many cases asking for additional documentation.

4. Appraisals are being done digitally

Appraisers aren’t entering properties and are instead using digital photos, or allowing clients to take the photos or get on a video call to virtually tour the appraiser around the property.

5. 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.

6. Many (most?) lawyers/legal services are now doing digital signings

Provincial Law Societies and Land Title registries now have processes in place to allow for digital signings. As a result, legal/notary services (like First Canadian Title) and most lawyers are now able to facilitate virtual signing appointments, while still complying with law society and land title regulations.

7. Stress test changes 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%.

8. This too shall pass. We’re all in this together. There’s no I in team. Teamwork makes the dream work. It is what it is. Going forward, there will be a paradigm shift and we have to grab the low hanging fruit, push the envelope, and think outside the box to take it to the next level, for a value-added, net-net, win-win solution. 

Enough said. 🤓

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