Canadian interest rates (which impact mortgage rates) have been declining for 35 years. While mortgage rates are at record lows, home buyers and those thinking of refinancing still want the best rates with the most flexible terms possible.
Changing Mortgage Rules
It used to be a lot easier to get a mortgage and buy a home in Canada or even refinance. For example, 10 years ago, Canadians could get a mortgage with a 40-year amortization period. They could also purchase a home with zero down. All that changed when the U.S. housing market collapsed in 2008.
To avoid the same fate and to protect the Canadian housing market and the real estate investments of Canadians, former minister of finance Jim Flaherty introduced a number of tighter lending rules.
For example, in 2008, the government reduced the maximum amortization period for government-insured mortgages to 35 years. The minimum down-payment for new government-backed mortgages increased to five percent and potential homeowners needed to have a minimum credit score of 620.
In 2011, as the U.S. housing market continued to suffer and the Canadian housing market picked up steam, the government tightened lending rules further. The amortization period was reduced again from 35 years to 30 years. At the same time, the maximum amount Canadians could borrow when refinancing their mortgages was lowered from 90% of the home’s value to 85%.
In 2012, further steps were taken to slow down Canada’s red-hot housing market. The amortization period was cut again, from 30 years to 25 years. The maximum amount Canadians could borrow when refinancing their mortgages was cut from 85% of their home’s value to 80%.
In 2014, the Canadian Mortgage and Housing Corporation (CMHC) discontinued mortgage products for second homes and those who are self-employed without third-party validation.
3 Hurdles Candalend.com Can Help You Clear
While all of these changes were meant to prevent Canada’s housing market from collapsing, as well as prevent Canadians from taking on too much debt, they also made it much more difficult for home buyers to actually purchase a property or refinance their properties.
Listed are three common obstacles home buyers can face when looking for a mortgage or home owners can face looking to refinance.
Low Credit Score
In Canada, the minimum credit score you need to get the best rates is 680. You also need a two-year track record of managing your debt without any serious delinquencies. A low credit score or history of missing bills is a red flag for Canada’s big banks.
There are a large number of lenders out there willing to work with those with bad credit or that have declared bankruptcy. Best of all, because the licensed agents at Canadalend.com are independent, they have access to hundreds of different lenders.
Low Income or Self-Employed
If you’re self-employed or can’t provide proof of one to two years’ worth of stable income, it could cost you. When it comes to Canada’s big banks and income, more is more.
Canada’s major lenders want to know that less than 40%–44% of your provable income goes towards debt. That can be a tall order for many Canadians, especially when you consider the average Canadian makes $49,000 annually and the average price of a home in Canada is $448,862.1
Canadalend.com has access to hundreds of different lenders—private lenders that provide mortgages to those who are self-employed, don’t have a long enough record of employment, or don’t have a big enough salary.
Everyone wants the best rates with the most flexible terms. Unfortunately, getting both isn’t that simple. As a result, home buyers need to consider several factors when considering a low-rate mortgage and choose the option that’s best-suited to their individual circumstances. For example, you may need flexibility, so the lowest rates may not be available to you. If you need the lowest rate, that mortgage may come with some terms you’ll need to consider. The independent agents at Canadalend.com can help you find the best mortgage with the kind of flexible rates that fit both your financial and lifestyle needs.
Canadalend.com: Helping You Get the Best Rates and Terms
Tighter lending rules have certainly made it more difficult to obtain a mortgage or refinance through Canada’s big banks. Fortunately, the lending environment in Canada has changed over the last number of years.
For starters, the experts at Canadalend.com can help you find out how well qualified you are as a borrower. Because of their expertise, they can also help you find ways to clear hurdles like having a low credit score, an uneven employment record, and the need for flexibility.
To find out what kind of mortgage you qualify for, contact Canadalend.com today or apply online and a Canadalend.com mortgage specialist will set up an appointment at your earliest convenience.
“Average house price in Canada up 9.5% to $448,862,” CBC News web site, May 15, 2015; www.cbc.ca/news/business/average-house-price-in-canada-up-9-5-to-448-862-1.3075567.