Renewing Your Mortgage During COVID-19? Read This First.
Is your mortgage coming up for renewal?
For starters, if you have not applied for a mortgage since October 2018, there have been several changes rolled out since!
You are now required to pass the mortgage stress test when applying for a new mortgage or switching lenders. The stress test ensures that borrowers can afford the mortgage that they are applying for by qualifying them at a higher interest rate. The higher qualifying rate is only to ensure that you can afford your mortgage, the interest rate you will pay is usually lower than this.
For example, previous stress test rules could have your current finance approved for a $500,000 mortgage, but now with the same finances, you can only get approved for $400,000.
Read our previous blog on “NEW CMHC MORTGAGE RULES“.
☝️ Keep in mind that switching lenders may incur some penalties that you have to pay to move your mortgage. Switching within the 120-day window should avoid early payout penalties. Some other fees to consider are appraisal fees, set-up fees for transferring your mortgage, and other administration fees.
The pandemic has put things under a microscope.
The pandemic has changed the way that lenders review applications which could make renewing your mortgage a tad stressful.
Lenders are now reviewing any applications under a microscope so it is important to have your documents in order prior to applying for financing.
Below are some of the documentation that may be required:
- Income statements
- Business plans for self-employed applicants
- Personal net worth statements
☝️ If you’ve had to defer payments due to COVID-19, you may have to catch up on those payments before being able to switch lenders.
Before COVID, mortgage lenders were looking at clients according to three tenets: credit, income, and property. And, most lenders only needed to see a pay stub from as recently as 60 to 90 days prior to the closing date.
Now, those same lenders are insisting on seeing a pay stub from within 14-days. Basically, they want to know that the pandemic hasn’t affected your finances at all, or you’ll face the likelihood of not being approved.
On the whole, you should make sure your credit is in order, be prepared to open up your accounts, and prove that your bank account has COVID-19 immunity.
Finally, the FIRST thing that you can do to set yourself up for success while renewing your mortgage during COVID-19 is to reach out to an experienced mortgage broker like Butler Mortgage.
The Butler Mortgage Team can complete a review of your finances and your unique situation and run through any penalty calculations in order to give you advice on what the best solution is for you.
Looking for Mortgage Solutions During Pandemic Times?
If you were in the process of looking to buy a home or you own a home and looking for the right mortgage solutions during this pandemic, don’t hesitate to connect with us.
We are offering historically low mortgage rates. Speak to one of our senior mortgage agents to understand where you are today and what choices you have.
Avoid a bad future financial position. Avoid confusion. Avoid headaches.
CONTACT US any time and let’s start the discussion.