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Mortgage Rule Changes For Jan 2011
Easy to understand SlideShow on the new Canadian mortgage rules.
Mortgage Rule Changes for April 2010
As we had already reported last month, new mortgage rules are being put into effect from next April 19th, aimed at preventing home-buyers across Canada from getting into financial trouble once mortgage rates rise, as it has been anticipated.
Today, we are going to further elaborate on what are the implications of this new set of rules, and how they affect you, as the final customer.
Upcoming Change
INSURED MORTGAGES ONLY
The qualifying rate for any mortgage terms shorter than 5 years will now be the 5-year benchmark rate on the CMHC website.
Effective Date
April 19th, 2010
Reasoning
To protect borrowers from rising rates
Upcoming Change
Max 90% Loan-to-Value on Owner-Occupied refinances
Effective Date
April 19th, 2010
Reasoning
To prevent borrowers from losing their equity in the event their property value decreases. It also discourages borrowers from depending on their home equity to reduce personal debt.
Upcoming Change
INSURED MORTGAGES ONLY
Self-Employed borrowers with more than 3 years in the same business will be required to confirm their income and will not be eligible for “stated income” Self-Employed product.
Effective Date
April 9th, 2010
Reasoning
This product is intended for a small portion of borrowers who find it very difficult to document income- in particular, recently self-employed borrowers. It is assumed, individuals with longer time self-employed are able to confirm their income via a third party validation through financial statements, T4’s and other third party validations.
Upcoming Change
INSURED MORTGAGES ONLY
Maximum Loan-to-Value is 90% for purchase and 85% for refinances for Self-Employed borrowers unable to confirm their income via traditional third party sources
Effective Date
April 9th, 2010
Reasoning
As the associated risk is higher when the borrower cannot confirm income via a third party, a larger down-payment is required to mitigate the elevated risk.
Upcoming Change
Maximum 80% Loan-to-Value on Non-owner occupied rental properties
Effective Date
April 19th, 2010
Reasoning
To prevent investors from speculating about property values and to prevent a large influx of high-ratio financed non-owner occupied properties that may default if vacancy rates increase.
Upcoming Change
INSURED MORTGAGES ONLY
Where rental income is generated from the subject property, 50% of the gross rental income from the subject property may be added-back to the borrowers annual income
Effective Date
April 19th, 2010
Reasoning
To prevent investors from depending on rental income to qualify.
These new mortgage standards are primarily aimed at stopping housing speculators and ensuring homebuyers can adequately juggle their debts when interest rates inevitably rise.
The government has stressed that Canada’s real estate market is healthy, and that the new rules would only stop “negative trends” from development.
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For more information, please contact our team of mortgage brokers which are at your complete disposal. We are here to offer you the best mortgage rates, lowest prime rates, debt consolidation and Canadian housing assistance, and all other facets to help you achieve your dream home.
Top 10 Reasons for Using a Mortgage Broker
1. The Best Rate: Mortgage brokers have access to multiple sources of funding – from the chartered banks to private lenders. They deal with them on a daily basis – and on behalf of a multitude of clients – which gives them the leverage to negotiate the best terms and interest rates for their clients.
2. Intelligent Decisions: Open or closed mortgage? Fixed or variable rate? Monthly or weekly payments? A professional mortgage broker can help clients choose the best options for their particular situation.
3. Impartial Advice: Mortgage brokers work for their client, not the financial institution. They are 100% committed to finding the best home-financing options available to them – and tailored to their specific financial goals.
4. Convenience: A mortgage broker will take care of all the details on behalf of their clients – from the meetings with lenders to the negotiation of rates and terms right through to the completion of all paperwork.
5. Pre-qualifying: What’s the maximum amount that a financial institution will loan a client for the purchase of their prospective home? A mortgage broker can help clients determine their financing options at the very start of their home-buying process – and lock in an interest rate for a period of up to 120 days (to guard against fluctuations).
6. Credit Issues: If a client is self-employed and has difficulty proving income – or has had credit issues in the past – a mortgage broker can help them identify and resolve any problems with their credit application before they submit it.
7. Complications: Because of the complexities of mortgage financing, situations can arise that may be difficult for clients to address on their own. A mortgage broker can be their best advocate, steering their mortgage through the required channels much more efficiently than they could on their own.
8. Communication: Individuals trying to deal with a financial institution on their own may get lost in the shuffle – and find themselves wondering and worrying about what’s happening with their application. Mortgage brokers are highly-motivated to work closely with their clients to ensure everything stays on track, as they don’t get paid until all documents are completed and the mortgage is in place.
9. Peace of Mind: Members of any Mortgage Brokers Association must adhere to a very strict Code of Ethics and can help clients avoid fraudulent or unethical behavior. They can also refer their clients to qualified professionals, from property appraisers to real estate lawyers.
10. No-Charge Service: In most cases, mortgage brokers get paid by the financial institution (not the client). Those “finder’s fees” are fairly standard for all financial institutions, so there’s no incentive for a mortgage broker to favour one lender over another. In the rare case where fees may apply, the broker will discuss them well in advance in order to help the client make an informed decision.