With all the changes mandated by the Government this spring/summer, most Canadian’s are still a little bewildered as to how they are affected by these changes…let’s face it, as a full time Mortgage Broker I am still learning about their impact every day.  Whether you agree with the changes or not, they are here now and life goes on, so we all have to deal with them.  The part you may not be aware of, since the media is not focused on it, is that there are a great many more changes being made in the background that could have a massive impact on you & your family…even if you are a homeowner right now!

While the Minister of Finance stood up and trumpeted his dramatic mortgage rule changes in June, he was also quietly at work making massive changes to who controls the mortgage lending in Canada and loading up the power of the once near silent OFSI (The Office of the Superintendent of Financial Institutions Canada), which oversees the Banks of Canada (Credit Unions come under Provincial jurisdiction).  When first proposing their changes to standard mortgage underwriting procedures, one of their proposals was to make all Canadians have to qualify each time their mortgage term ended!  You would have had to “reapply” each time your term was over…they let that idea die, while sliding in a number of changes that all banks and mortgage lenders in Canada (other than Credit Unions) must now start to implement ( guidelines ) by Quarter 1 of 2013.

This is all pretty dull and dreary stuff I agree, but it may very well may mean that when you go to buy a home, refinance your home, or even sell your home and buy another, you will not qualify the way you did previously.  Please read that again, it is very important!

At the very least, you will be jumping through a lot more hoops than you ever did before!  Expect to supply much more documentation, answer much more detailed questions, and have to prove things much more than you have ever been asked, all in the name of “protecting” you from yourself.

Salaried people will have to show Job letters, paystubs and T4s…and if there is any bonus or commissions  3 years of Notice of Assessments from Canada Revenue will be required to prove an average.

If you are self employed you will have to produce three years of not only your Notice of Assessments from Canada Revenue, but the accompanying T1 generals, and they will be reviewed in detail.  Dividend income is not considered income, it is considered a one time bonus, so even if you receive it on a regular basis, say for the past three years, an exception to use the average will have to be granted.  Anytime you are asking for an exception, your chances for approval lower.  If you are a rental property investor and not all of your properties show on your T1s, don’t expect an approval…the Government is using this to force people to “properly” report their income more and more.

Gifted down payments will require proof from the gifter, the gifter’s information (so they can be run through the Terrorist watchdog list), and the exact gifted amount being deposited into the borrower’s account (copy of the Bank statement)!

I write this not to scare you, but to make you aware that things are going to be more difficult in the near future.  if you are planning to do something and are concerned, now is the best time to deal with this…do not wait!  If you are self employed, now is the time to start showing more income on your T1s if you can.  Switching to dividend income now doesn’t make sense if you plan to apply for a mortgage in the next couple of years.  Even changing jobs right now could impact your borrowing ability.

If you have a Mortgage Broker, now is the time to review your personal situation with them and make a move…this is going to be a long process, best to have a plan in place now to deal with it.

Feel free to contact me for a review of your situation.

Michael Anthony Lloyd

Email: mike@cmexp.com

Phone: 604-341-8775, toll free 1-888-536-8208