Frightened borrowers take out a second mortgage at higher rates than usual.
According to Adma Maher, a mortgage agent with Assured Mortgage Services, lenders are increasingly turning down contracts these days, forcing borrowers to turn to the private sector for second-hand mortgages.
“It’s getting harder and harder for people to qualify, especially with the qualifying rate,” she said. “It went from 4.64% to 4.84%, 4.89% then 4.99%, so with this huge jump, a lot of people have to either go to B, where there is more flexibility, or private.
“Not only is it harder to qualify, but a lot of people don’t have enough funds for the down payments, so for the deal to work, a lot of people take out another mortgage to cover the difference for the down payment. be eligible. ”
Steve Garganis, a mortgage broker at Mortgage Intelligence, noticed the same thing. In particular, he noticed a tightening of the stipulations of the lenders each year. Not only do independent borrowers not get approval, but neither do lawyers – a sign that even high-income borrowers are being left out.
“There is an increase in second mortgage borrowing because people don’t qualify for what they did a year or two ago due to regulatory changes last year, the previous year and the last year. ‘previous year,’ he said. . “We’ve seen a tightening every year for the past five or six years.”
Borrowers are also refinancing en masse, it seems, because news of the B20 spreads.
“The word is out and people are realizing that if they want to access equity or equity in their home, they might not qualify next year for what they want, so there is a little panic, ”Garganis said.
In particular, borrowers who are stuck in a very good fixed rate find that their luck is running out and that they take out favorable second mortgages while they still can.
“Second mortgage loans have become a product of choice, but that could also be due to the fact that we have had historically low interest rates,” he said. “So if someone has a really good interest rate in a five-year rate of 2.5%, or 2.4%, which is possible, and then they need to borrow more money, it doesn’t make sense to break that rate on a $ 300,000 or $ 400,000 mortgage just to get to $ 40,000 to $ 50,000 because the cost of doing this is more prohibitive than getting a mortgage. secondary funding.
“I recommend this strategy to my clients when I see a good rate or price on their first mortgage. Obviously, qualified applicants must obtain a secured line of credit. “
But secure lines are incredibly difficult to qualify.
“It’s a very difficult product to obtain,” he says. “A huge number of people try to get secure lines of credit, but fail to get them.”
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