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New mortgage rules: A golden opportunity for brokers

January 10 2017 by Multi-Prêts Hypothèques
What you'll learn
  • Will Canada’s new mortgage rules cause the demise of brokers?
  • The mortgage broker sector: saturated or not?
  • Who is the most impacted by the country’s new mortgage rules?
  • Can homebuyers qualify for a mortgage in a financial institution if they were refused elsewhere?

Canada’s new mortgage rules came into effect on November 30, 2016. Does this spell the end of the mortgage broker profession? Not at all! In fact, mortgage brokers will be more needed than ever before! Because the new mortgage rules are more complex and restrictive, buyers will more likely call upon the services of a broker to assist them in obtaining a loan. After all, the inherent role of a broker is to provide advice and accompany future homeowners throughout the entire mortgage process. 

The role of mortgage brokers is becoming increasingly similar to that of financial planners, because they have an in-depth understanding of the wide array of products financial institutions offer, the various requirements to obtain a loan, and the industry norms that govern how people can purchase and finance a home. 

Mortgage brokers: A profession that shows no signs of slowing down

In the province of Québec, between 150 000 and 175 000 mortgages are recorded each year; however, only 30% are overseen by a mortgage broker. Does this mean that the professional is slowing down? Far from it. In Canada, 40% of mortgages are signed using a broker. In the United States, 75% of mortgage agreements were concluded using a broker. In other words, the profession is experiencing growth and will continue to flourish over the next few years. It’s only the beginning of the golden era of mortgage brokers!

Who is most impacted by Canada’s new mortgage rules?

Simply put: everyone is affected by the country’s new mortgage rules—but to varying degrees. Financial institutions are currently revamping their mortgage products.  For example, home refinancing now hovers over 75% of the value of a property. Financing condos and single-family homes to rent them out has become more difficult. 

An important caveat: just because buyers have been refused at one financial institution does not mean they cannot obtain a loan at second bank. The criteria for qualifying for a mortgage can vary from one institution to another.

A rejected mortgage application is only the beginning

Today, financial institutions offer a myriad of mortgage products; a homebuyer needs to carefully determine which ones are most suitable. The role of a mortgage broker consists of identifying the best possible loan for a client before even presenting him or her with a rate. Whether an application is simple or complex, a mortgage broker becomes an invaluable ally to demystify all options and pinpoint the right loan and financial institution.

The percentage of first-time homebuyers that may not qualify for a mortgage is low (approximately 10%). People will still be able to buy property; however, brokers will need to help clients rethink their projects and ensure that they have good debt ratios.. Mortgage brokers can help to explain the ins and outs of each potential loan and apply only to financial institutions that are most likely to accept client applications. 

Other benefits of mortgage brokers

If clients are looking to renovate their homes or carrying a lot of debt, mortgage brokers can also help to find optimal solutions. In the event that a couple separates and one member decides to keep the home, a mortgage broker will guide the buyer and answer any questions he or she may have.

In sum, the mortgage broker sector is much more stable than the real estate market. For example, when the real estate market slows down, homeowners carry out more renovations. Even if the real estate market would stagnate for a long period of time, homebuyers will still need to consolidate their debts, get help during a divorce, or establish a strategy to protect their property titles. 

Key takeaways
  • The work of a mortgage broker is more relevant than ever before, because Canada’s new rules have increased in complexity.
  • Only 30% of Québec’s mortgages are overseen by a broker. In Canada, this number represents 40%.
  • Everyone is affected by the industry’s new mortgage rules—to varying degrees.
  • If a mortgage application is denied at one financial institution, potential homeowners can still apply elsewhere. Each bank has its own set of criteria.
  • A mortgage broker can provide useful advice during a divorce or when consolidating debt.
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