In the last year, more changes have been introduced to the mortgage rules in Canada and some of these changes affected refinancing a mortgage.
In the past, one was able to refinance their home up to 95% of the value however a few years ago, the government capped refinances at 80% of the appraised value of a home.
Until recently a refinance was considered an insurable product and with that, could be priced with a great low rate.
However in recent changes, the Office of the Superintendent of Financial Institutions and CMHC decided that a lender can no longer insure these products.
For someone wanting to refinance, this now means that lenders are not offering the same low rates for refinancing as for other products such as a purchase mortgage. As well, some lenders are not offering a refinance option or can only offer this option at a very high rate. The interest rate spread between an insured, insurable and uninsurable mortgage can be upwards of 0.55% difference now depending on the lender and product.
See my video about insured, insurable and uninsured mortgages to learn more about this.
In addition to the changes noted above, lenders are also qualifying a refinance now at the benchmark qualified rate, also known as a stress test, which currently is 5.34%.
When mortgage rules tighten, having more options in terms of lenders, products and rates is very important to assure you are getting the best options for your needs.