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Mortgage Renewals are About to Get Tougher!

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Mortgage Renewals are About to Get Even Tougher!
There’s been so much talk about mortgage stress testing for the past few months that very few people realize there’s another change at play that will impact mortgage renewals.
New accounting standards were introduced in January 2018 that require lenders to not only report loans that have already gone into default every reporting period, but now also assess the probability of existing borrowers who are likely to suffer arrears – and what those losses will add up to throughout the life of the mortgage (ie, expected losses and how such losses impact the capital lenders must hold in provisioning for potential losses).
The new accounting rules are known as the International Financial Reporting Standards (IFRS9). Lenders with non-calendar year ends will have up to two years from January 2018 to adhere to the new standards, yet several have already started to abide by these rules.
Previously, lenders followed the International Accounting Standard 39 (IAS39) provision for losses on an ‘incurred loss model’ basis, which means they only had to report real losses from mortgages that had already gone into default.
What does this mean for renewals?
Traditionally, renewals have been very straightforward for borrowers who’ve paid their mortgages on time throughout their mortgage term. 
But, under the new rules, more lenders will be pulling credit bureaus for mortgage holders approaching their renewal dates to ensure they’re still creditworthy and, therefore, likely to continue paying their mortgage on time.
 
This can mean that if your lender thinks you are at risk, they may offer you a higher rate than you are expecting, or may not offer you a renewal at all!
As such, it’s vitally important to stay on top of your finances.
Be proactive
Now more than ever, it’s essential to check your credit report every year to make sure there aren’t any issues you need to address or fix. Even if you’re fighting a bill that’s incorrect, this can negatively impact your credit score. So, when disputing a matter, be sure to inform both Canadian credit-reporting agencies – Equifax and TransUnion – and err on the side of caution where your credit is concerned.
It would be my pleasure to conduct a free annual mortgage/financial checkup for you as well to ensure you’re on course for a straightforward renewal, refinance or whatever you may need.
It’s particularly important to give me a head’s up if you plan on changing jobs or becoming self employed, have a health concern, or face any type of change in your life that may impact mortgage requalification. Planning for these changes will help ensure you don’t jeopardize your future mortgage needs.
Have questions about ensuring you’re in good shape for your Red Deer mortgage renewal or your mortgage options in general? Answers are just a phone call or email away!

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