Mortgage stress test update
Our mortgage specialist from RBC sent out the update info please see summary below.
For those who are not familiar with the new Stress Test, here is the summary point in one sentence:
As of January 1st , 2018, when qualifying clients for a conventional residential mortgage (meaning clients with 20% or more d/p), banks are required to approve a conventional residential mortgage at the greater of the client rate plus 2% or the 5-year benchmark rate published by the Bank of Canada. Some estimate that the amount of mortgage that can be approved with the new qualifying rate would be as much as 20% less than the current (old) qualifying rate.
Now, we do have limited time to assist your clients to bypass the Stress Test prior to January 1st, 2018.
For all pre-sale purchases, if your clients have an accepted offer already, as long as your clients are firm-approved by RBC before December 31st, 2017, we can still qualify clients with old qualifying rates for the maximum financing and guarantee the funding until funding, which may be 2 or 3 years later.
For all pre-approvals (clients haven’t found the property yet), as long as they are being pre-approved by RBC before December 31st, 2017, again, we will be able to pre-approve the clients with OLD qualifying rate for the maximum financing amount. PLEASE NOTE: Our pre-approval is valid for 120 days, and if clients pass the 120-day commitment period, NEW qualifying rate will be in effect, and mortgage financing amount will be reduced accordingly.
For example: Client got pre-approved by RBC on December 1st, 2017 and a valid pre-approval letter was issued to the client for the commitment confirmation. On January 15th, 2018, she finds a property and got an accepted offer, she will still be able to convert her pre-approval to firm-approval status with old qualifying rate.
Example 2: Client got pre-approved by RBC on December 1st, 2017 and a valid pre-approval letter was issued to the client for the commitment confirmation. But she can’t find anything within the 120-day commitment period. In June, 2018, she comes back with an accepted offer, she will need to be qualified by the NEW qualifying rate as per regulation.
For all re-financing with existing RBC mortgage or switch-in mortgages to RBC, as long as clients got firm-approved before December 31st, 2017, OLD qualifying rate applies.
So once again, RBC does NOT require you to secure an offer before December 31st, 2017. As long as you are pre-approved before December 31st, 2017, old qualifying rate will apply within the next 120 days, which means your clients still have a bit more time looking for their ideal properties until April 2018. Again, 120-day commitment is crucial and please make sure that your HV clients are aware of that.
For more information please contact Mick Lo at 604-430-2986.