It’s fair to say that the reaction to OFSI’s new mortgage guidelines was far from positive. The lending rules now require the minimum qualifying rate for uninsured mortgages to be the greater of the five-year benchmark rate published by the Bank of Canada (presently 4.89%) or 200 basis points above the mortgage holder’s contractual mortgage rate.
It’s a move that is going to prevent both first-time buyers and investors when it comes to financing new property purchases – both will now qualify for much less mortgage.
However, it’s not all doom and gloom. Sustainable rent-to-own programs can help – and benefit – both investors and first-time buyers affected by the new rules introduced to the Canadian mortgage market.
“Our Home Owner Soon rent-to-own program can really help first-time home buyers, investors, mortgage brokers, and real estate agents in this dynamic mortgage landscape” says Terry Hepditch, Business Development Manager at HOS Financial
. “It’s been in the market for almost 16 years and is a program which helps the key players in the industry to work together in order to help families achieve their dream of homeownership. It’s a real win-win.”
Rent-to-own programs represent a good alternative investment strategy for real estate investors in Canada’s ever tightening market. They also create a realistic bridge to home ownership for consumers who have been turned down by the banks because of the new lending regulations. However, a good rent-to-own agreement must be mutually beneficial for the future home owner and investor, and should only be considered a success when the tenant exits the deal by executing the forward purchase and sale agreement.
According to Hepditch, a well-balanced rent-to-own program should feature some key characteristics: Strong vetting process for inquiries received, a pre-defined exit strategy, social responsibility, quality debt management, a credit coaching program, above average starting security deposits from tenants and most of all, a team who is experienced in all areas of rent-to-own.
“It is also key for investors to work with a rent-to-own program which has a specialized mortgage division who understands the lending landscape and can advise investors of their mortgage options,” says Hepditch.
“The changes to the mortgage lending landscape are creating a much bigger pool of quality investments for investors to consider, but, at the same time, it is restricting the investor’s ability to access these opportunities. Working with a dedicated mortgage team helps investors get the solution that best suits their situation. The experience and knowledge of the HOS Financial Mortgage
team is vast and has been helping Investors since inception of our Rent to own program 16 years ago.”