Canada’s new mortgage lending and insurance rules – Mortgage Guys
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How the new mortgage lending and insurance rules are affecting Canadian home buyers

Open mortgage season

There is now a new aspect for existing and potential homeowners being emphasized by the new regulations imposed on the traditional lending institutions. It is called “Shadow Banking” which offers a service to home buyers who are unable to obtain a conventional loan.

New federal rules have been adopted with firm warnings being given to lenders that demand the banks to qualify borrowers taking into account increased interest rates. Furthermore, additional limitations must be imposed on mortgages for buyers able to only make small down payments. Financial institutions are compelled to share the risk factor by taking out insurance policies on mortgages with a low-ratio.

It has created a situation whereby lenders have become increasingly selective about home loans approved. The result is that frustrated and even desperate borrowers will seek mortgages from unregulated firms, who are not required to take out federal mortgage insurance. It’s a predicament that calls for buyers to give careful thought to future commitments and seek professional advice from qualified professionals on Private Mortgages in Kitchener.

This can particularly be related to the fact that borrowers will be burdened with a higher mortgage rate. However, it could also be viewed as a necessary entrance fee into the potentially lucrative property market that has the appearance of being in “open season.”

Buyers beware

A potentially critical situation is or has been created for home buyers, with some predictions forecasting buyer volume leaving the traditional forms of lending and turning to the unregulated sources. A more direct prediction is that this development will see a dramatic increase in other sources of lending.  It is this aspect which could be of concern for home buyers and one they should approach with caution. Before taking any action related to obtaining a loan consult your qualified independent advisors. They are experienced in all aspects of home loans, especially with regard to the new regulations and the alternatives available to you.

There are various other negative aspects awaiting the unaware buyer, with concerns being expressed regarding the unintentional creation of economic risk. This would be worsened by a credit bubble sitting on top of the real estate bubble; a potential reality.

Get professional advice!

As a home buyer, you are responsible for investing in probably your greatest asset. It is therefore, worthwhile contacting a professional before making any decision regarding buying or selling a property. As they say in the classics “better safe than sorry” and in this particular financial environment, that is so true!