When the federal government under the Liberals made all the changes to the mortgage rules, they did it with ZERO consultation from the industry. Our industry immediately detected, the gaps and collateral damage it was going to do to Canadians by making it harder for them to buy a home. The Conservative Party actually reached out to our industry for input to learn how to use financial prudence while still giving Canadians the power of choice.
We are not endorsing a political party; my comments are solely based on this industry-specific party platform announcement.
1. First time homebuyers will benefit significantly from a 30-year mortgage
This won’t help them qualify for more so we still have prudence with the stress test (which is well over 2% higher than what they actually pay), however, Canadians cash flow will greatly improve to help them with the continued increase in the cost of living and help them avoid outside debt by having cash aside for an emergency. The 30 year mortgage is a great planning tool, which gives Canadians the power to better financially position themselves. It’s important to note that people who purchase with a 20 percent down payment already have access to a 30 year mortgage. On a 350k mortgage, this will give Canadians approx. $185/ month in additional cash they can save for an emergency so they don’t have to turn to high interest credit cards, spend on groceries, family essentials, or which will allow them to consider future- income producing investments while still maintaining a home!
It’s also important to note that “when” the Conservative government had a 40 year mortgage option in place, interest rates were more than double what they are now. Today, interest rates are less than half of what they were at that time even including the stress test, so it only made sense for them to reduce the length of mortgage terms as rates went down.
2. No stress test on renewals
THIS was the collateral damage that impacted anyone going through a renewal or porting a mortgage in the last few years. Canadians that got a mortgage under the previous conditions were forced to pay more interest with different lenders or their own, as they didn’t qualify for the mortgage they had. Some Canadians had to pay up to 2 percent higher at renewal with an alternative lender or in some cases, their existing lender was able to take advantage of the fact that they weren’t able to qualify under new rules. For example, on a 350k mortgage, the stress test increased some mortgages holders’ monthly obligations by $396 a month, with no benefit to them. They were just a part of the damage not considered when the government made changes without consultation! This was something that should have been in place or considered or modified. We are happy to see this being brought to the attention by the Conservative’s plan.
As mortgage professionals, we are passionate about transparency and empowering Canadians through education. While there is no one party we agree with in terms of all of their policies, I feel if this were to be implemented by any party, the advantage to Canadians would be more empowering and certainly based on the numbers and examples above, puts more money in your pockets to utilize as you see fit.
The other parties have discussed raising the first-time homebuyers’ limit, and there is still a good month left in the campaign, so we will see how things continue to develop.
The Angela Calla Mortgage Team is always here to help with clarity on any mortgage content.
Angela Calla is a 15 year award-winning woman of influence and mortgage expert. Alongside her team, passionately assisting mortgage holders get the best mortgage, and educating them on The Mortgage Show on CKNW for over a decade and through her best-selling book The Mortgage Code available on Amazon. To purchase the book click here: The Mortgage Code. Proceeds from her book sales are donated to local charities helping families in the Tri-cities community. Angela can be reached at firstname.lastname@example.org or 604-802-3983.