In its recent economic statement, Ottawa unveiled a “mortgage charter” that sets out rules banks must follow to help subprime mortgage holders.
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Most of the “rules and expectations” contained in the charter already exist, but the federal government wants to highlight them to help consumers better understand their options.
One change, however: Ottawa is asking financial institutions to stop requiring a borrower to pass a “stress test” if they have an insured mortgage loan that is expiring and want to switch financial institutions. During these tests, the bank checks whether you qualify for a loan by adding a percentage (2%) to the proposed mortgage rate.
The charter also states that Canadians can expect financial institutions to:
- allow temporary extensions to the amortization period for subprime mortgage holders;
- waive fees and costs that would otherwise have been charged for the relief efforts;
- Contact homeowners four to six months before renewing their mortgage to let them know their renewal options.
- Give at-risk homeowners the option to make lump sum payments to avoid negative depreciation or sell their primary residence without a prepayment penalty.
- In the event that mortgage relief measures result in temporary negative amortization, we will not charge interest.