Posted: 28 Feb '18

Do the New Mortgage Rules Help in Refinancing with Bad Credit



So, you want to refinance your mortgage, but you have less-than-perfect credit. The good news is that although prime lenders have stringent qualification rules, it's still possible to obtain a mortgage refinance with bad credit. The bad news is that the changes to the mortgage rules, which came into effect in October 2017, significantly impact homeowners whose mortgages are coming up for renewal. Here's what you need to know about the new mortgage rules and how they will affect your ability to qualify for a mortgage refinance with bad credit.

What are the New Mortgage Rules?

Under the old mortgage rules, only insured mortgages need to qualify at the Bank of Canada's posted rate (currently 4.84 percent, which is approximately 200 basis points above typical contract rates). Under the new mortgage rules, consumers who have paid less than 20 percent down on their mortgage will also need to qualify at the higher rate. Other changes that are expected to be made under the new mortgage rules include:

  • Requiring that loan-to-value (LtV) calculations be adjusted for local conditions when qualifying borrowers
  • Disallowing "bundled" mortgages (mortgages that combine a second mortgage with a prime lender's first mortgage.

How Will the New Rules Affect a Mortgage Refinance with Bad Credit?

Whereas under the old rules only first-time home buyers were subjected to stress test requirements, the new rules affect borrowers who wish to refinance -- and those seeking a mortgage refinance with bad credit will feel the impact the most. This is because consumers may no longer qualify to borrow the same amount that they would have under the current rules.

Obtain a Mortgage Refinance with Bad Credit

If your home loan is up for renewal but you have a less-than-perfect borrowing history, don't panic. A skilled mortgage broker can help you. For more information about how you may be impacted by the new mortgage rules, or to discuss mortgage refinancing with bad credit, contact us today.

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