Stress Test Removed for All Renewal Switches

Latest News Nicole Perri 11 Oct

Another Government of Canada mortgage update?!?

Effective November 21st, 2024 all mortgages that come up for renewal will no longer have to go through the stress test when switching lenders. This change is a positive for every Canadian homeowner because it will remove the barrier of a higher qualification you faced before.

What is the Stress Test?

In 2016, the Office of the Superintendent of Financial Institutions (OSFI) introduced the Stress Test as a buffer to ensure every mortgage borrower could afford their mortgage payments if interest rates rise. Banks are required to test your mortgage application by a minimum of 5.25% OR your actual rate + 2%, whichever is higher.

What are the savings you could see from this change?

If you take advantage of switching to another lender at renewal it could save you thousands over the term of your mortgage. For example, you have a $500,000 uninsured mortgage with a 25 Year Amortization. You are looking to switch lenders who are offering a 5-year fixed rate of 5%. Your current lender is offering a 5-year fixed rate of 5.25%. This 0.25% difference can result in:

  • Current Lender Monthly Payment (5.25%): $2,979.59
  • New Lender Monthly Payment (5%): $2,908.02
  • Savings over the term of your mortgage from switching lenders: $6,013

This example is one of many in the future once this change comes into effect. It will allow homeowners to save thousands of dollars over their term.

If you have any questions about your mortgage renewal please reach out to me at nperri@dominionlending.ca!

Mortgage Update – Add a Suite to Your Mortgage

Latest News Nicole Perri 11 Oct

The Government of Canada announced a new change on October 8th, 2024 enabling homeowners to add secondary suites to their property.

Many homeowners have extra space they may want to convert into rental suites, such as an unused basement, or a garage that could be converted into a laneway home. Historically, the cost of renovating, combined with municipal red tape, has made this both difficult and expensive.

Recent municipal zoning reforms in Canada’s major cities are creating new opportunities for homeowners to add additional suites and increase density. New rental suites would provide more homes for Canadians and could provide an important source of income for seniors continuing to age at home.

Here are the details for lenders and insurers to offer this new insured mortgage refinancing product, effective January 15, 2025.

Parameters

  • This measure will apply to all borrowers seeking to access mortgage insurance in Canada to add more units (secondary suites). These borrowers must satisfy the following requirements:
    • Already own their properties;
    • The borrower or a close relative are occupying one of the current units;
    • Intend to construct additional units; and,
    • The additional unit(s) must not be used as a short-term rental.
  • Refinancing: Insured refinancing will be allowed for the purpose of building additional unit(s).

We haven’t seen an insured Refinance since 2016!!

  • Legal units: The new units must be fully self-contained units (e.g., basement suites with separate entrances, laneway homes) and meet municipal zoning requirements.
  • Number of units: Maximum of four dwelling units including the existing unit.
  • Maximum Property Value Limit: The “as improved” value of the eligible residential property against which the loan is secured must be less than $2 million.
  • Maximum Loan-to-Value limit: Up to 90% of the property value, including the value added by the secondary suite(s), in combination with any other outstanding loans secured by the property.
  • Maximum amortization: 30 years.
  • Additional financing must not exceed the project costs.

Other Parameters

  • Effective date: These measures will be available for mortgage insurance applications that lenders submit to mortgage insurers on or after January 15, 2025.
  • All other eligibility criteria for government-guaranteed mortgage insurance will continue to apply.

Source: Government of Canada Website

If this sounds like something you would be interested in doing, please reach out! My email is nperri@dominionlending.ca, I look forward to hearing from you.