The new Canadian Mortgage Charter was introduced in the 2023 Fall Economic Statement by the federal government. It is a strategic initiative that is aimed at addressing the challenges of housing affordability in Canada, which have been affected by factors such as rising interest rates and low housing supply. The Charter sets forth expectations for lenders, particularly in their dealings with “vulnerable borrowers,” aiming to provide some relief and support to homeowners grappling with the financial strains of maintaining their mortgages under the current economic conditions.

The Charter outlines specific relief measures for homeowners, including allowing temporary extensions of the amortization periods for at-risk mortgage holders, waiving fees and costs associated with relief measures, and ensuring that borrowers switching lenders at renewal are not required to requalify under an insured minimum qualifying rate. These measures are part of the government’s broader effort to ensure that Canadians are aware of the available relief options to help them manage the temporary financial stress brought about by elevated interest rates and remain in their homes.

What to Expect From Lenders and Banks 

Key points of the Charter include its focus on ensuring that banks and other lending institutions behave responsibly towards vulnerable borrowers. This involves providing clear guidelines on relief measures like temporary amortization period extensions, fee waivers, and prepayment penalty absences for homeowners looking to avoid negative amortization or sell their principal residence. Additionally, the Charter mandates that lenders contact homeowners well in advance of their mortgage renewal to inform them of their options, which is a new requirement aimed at improving transparency and support for borrowers.

While the Charter is intended to offer significant support to homeowners, it’s important to note that it is not a law but a set of expectations from the government towards financial institutions. The effectiveness of the Charter in providing substantial financial relief is yet to be seen, as compliance by lenders is encouraged rather than enforced. If a lender does not adhere to the Charter’s expectations, the only recourse for borrowers is to lodge a complaint with the Financial Consumer Agency of Canada (FCAC), with unclear consequences for non-compliance.

In summary, the Canadian Mortgage Charter outlines six commitments that borrowers can expect from their banks: 

1. Extension of Amortization Periods: Banks will offer the option to extend the amortization period for mortgage holders at risk, providing them with lower monthly payments over a longer period.

2. Waiving of Fees and Costs: For those taking advantage of relief measures, banks will waive fees and costs that would otherwise be charged, making it easier for homeowners to access these supports.
3. No Requalification for Insured Mortgage Holders at Renewal: Insured mortgage holders will not be required to requalify under the insured minimum qualifying rate when switching lenders at the time of mortgage renewal, facilitating easier transitions between financial institutions.
4. Early Renewal Outreach: Banks will proactively contact homeowners four to six months in advance of their mortgage renewal to inform them of their options, ensuring that borrowers are well-prepared and informed about their choices.
5. Lump Sum Payment Options: Homeowners at risk will be given the ability to make lump sum payments to avoid negative amortization, or sell their principal residence without facing any prepayment penalties, providing more flexibility in managing their mortgage.
6. No Interest on Interest for Relief Measures: In cases where mortgage relief measures result in a period of negative amortization, banks will not charge interest on the accrued interest, preventing an additional financial burden on the homeowner.

Conclusion 

Managing mortgage debt with other debt types like student loans, credit cards, and payday loans is not an easy task but just because something is hard doesn’t make it impossible. There are ways through which you can manage your debt. There is debt consolidation, consumer proposal, debt settlement, budgeting, and bankruptcy. To determine which one will help your situation and offer you peace of mind, you need to speak with a debt expert.

Debt experts are trained to offer personalised counselling to people with debt and are looking for a way out. No two situations are the same, so you need to speak with a debt expert who will walk you through that process. At EmpireOne Credit, we have debt experts who are trained to help you get rid of debt and offer you the support you need all the way. Your debt can be reduced by up to 80%, and interest will stop immediately. Call us at (416) 900-2324 to schedule a free consultation with us. Being debt-free feels good!