A charter to support mortgage borrowers

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.

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