Back near the end of 2017 the Office of the Superintendant of Financial Instituions (or OSFI if you’d like to get to the point) introduced a mortgage stress test. And ever since, it’s been near impossible for many in the market to get approval to buy a residential property. Most especially for first-time home buyers. The purpose of this test was to protect Canadians from getting in over their heads, but instead it has prevented many would-be Canadian home owners from getting into the pool (or pond, or creek. You take your pick.) Housing prices were growing and growing with no end in sight, the Bank of Canada (BoC) was hiking interest rates over and over, and Canadian households were struggling with record debt levels. Something had to be done. Apparently.
More Harm Than Good
The OSFI’s roadblock definitely did it’s job. A little too well, according to some. 10% of home buyers no longer qualify for a mortgage with the banks. Many of those who are now disqualified are would-be first-time home buyers. But because they’ve been denied, the next tier of home-owners looking to sell and move up are at a stand still. Along with the tier above that. And the one above that. It’s like a tree of dominoes, all set up and ready to fall beautifully. Except all the dominoes are standing still because OSFI regulations won’t let the banks push the first one over.
So how are you supposed to swim under these kinds of conditions? Calgary Mortgage Brokers have solutions for those who DO have the qualifications for a mortgage under the current stress test, and those who DO NOT.
If you HAVE managed to qualify for a mortgage we congratulate you! If you also happen to be moving up in the real estate game (selling one property to purchase another) we have a suggestion you may want to cash in on. The one branch of dominoes that has been falling down without a hitch is the rental market. Those who are being denied a mortgage are having to look at rentals instead. Instead of selling your current home, we suggest looking into turning it into a rental! Now is a great time to get into this market.
The Have Nots
When you want to keep a roof over your head, being denied a mortgage can feel like a crushing blow. Whether you’ve decided it’s time to put your income into a home you actually own; working to move into a something that better suits your growing (or shrinking) family; or you’re looking for something that accommodates a life with a pet pig (no judgement), being denied can leave you feeling left at sea. Our best advice is to find a cosigner. This option sometimes feels awkward for the buyer and risky for the cosigner, but it is done more often than you think, and it works. Plus, Calgary Mortgage Brokers can give you access to a lender which allows for temporary cosigners. Your cosigner is only obligated to stay on the contract for a single year. Win win!
If these options sound like something you’d like to hear more about, contact us today! Don’t put the sun screen and pool floatie away just yet. You’ll be swimming soon. Well, you know, as soon we see temperatures above zero.