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Monday, 17 October 2016

Stress test for new mortgages aka rates might go up soon?


1. The Mortgage Rate "Stress Test"  Effective October 17th, you're going to need to pass a tougher stress test when qualifying for any insured mortgage. This applies even if your down payment is more than 20% but your lender requires mortgage insurance. You can still avail of today's low interest rates. The government is saying you should qualify based on a higher rate. That rate would be the Bank of Canada's five-year fixed posted mortgage rate. As of September 28th, that rate is 4.64%.  What does this mean exactly?  *Any home buyer

that has less than 20% down payment will now have to qualify using the Bank of Canada's 5-yer posted rate regardless of what the product or term is chosen. So for instance, if you are getting 5-year fixed term today at 2.34% today, you will still have to qualify at 4.64% which is nearly double than your actual interest rate. This will significantly cut the mortgage amount you could borrow.   * Any home buyer or existing homeowner looking to purchase or refinance will be subject to the same qualifications above if their lender requires mortgage default insurance even with more 20% down payment or equity.  
Get Your FREE advise from one of Canada's Leading Mortgage Brokerages, get a peace of mind!

2. New restrictions for low-ratio mortgages  Beginning November 30th, there are specific criteria for any home buyer applying for a low ratio mortgage  The amortization (period of the loan) must be 25 years or less  The purchase price is less than $1 Million  Your credit score has to be 600 or greater  The property has to be owner occupied   

3. Capital gains exemptions for primary residences  Selling your primary residence is tax-free. You don't have to report it as income tax on your tax returns. When these changes come into effect, selling your primary residence remains tax free. But now it has to be reported to the Canada Revenue Agency.    This change is primary targeting foreign buyers who have been evading Canadian tax laws. They buy a home (as an investment), flip it, and sell it at profit without paying taxes. They do this buy saying it's their primary residence, even though they may not have lived there.   

4. Lenders and the risks they take  The government is telling the banks and lenders to take some of the risk. This mortgage rule change could to higher mortgage rates. Lenders can no longer rely on the government to cover mortgage defaults. They would take on some of the responsibility. This would encourage more prudent and careful mortgage practices. Ultimately it could lead to higher mortgage rates so that lenders can afford to cover themselves for defaults.

Wednesday, 5 October 2016

Reverse mortgages, learn about the facts

What is a reverse mortgage?
How does it work?
Advantages of a reverse mortgage!
Disadvantages of a reverse mortgage!
Where can you get a reverse mortgage?
How do you qualify?
Tips to keep in mind!
Before you make a decision, be sure you also consider:
Be sure you fully understand the terms and conditions of the contract before you sign it. By exploring all of your options, you will be better able to make the decision that best suits you.
Ask all of these questions before you commit to a reverse mortgage:
·        What are the fees?
·        Are there any penalties if you sell your home within a certain period of time?
·        If you move or die, how much time will you or your estate have to pay off the balance of the loan?
·        At your death, what happens if it takes your estate longer than the stated time period to fully repay the loan?
·        What happens if the amount of the loan ends up being higher than the value of the home when it’s time to pay the loan back?
For more information and get a FREE consultation session:

Tuesday, 4 October 2016

New mortgage rules comming in effect

 DLC Regional Mortgage Group Oct.04.2016.

Over the past few years we have seen a large number of mortgage rule changes. 
  •      -Maximum amortizations decreased from 40 to 25 years
  •      -Terms less than 5 years required a borrower to qualify at a higher interest rate
  •       -Refinances capped at 80% of a property’s value
  •       -Income for self-employed individuals had to be more verifiable
  •       -Increased down payment for homes over $500,000

And the list can go on and on. We have heard rumors since March of this year that another round of rule changes were coming through but we were not 100% on exactly what they would entail.
Why are they even worried about it you may ask? The reason is simple, they are heavily invested in our real estate market. CMHC stands for the Canadian Housing and Mortgage Corporation which is owned by the federal government.  They are issuing insurance policies that they are potentially going to have to cover losses on from tax payer’s money if/when people stop paying. 

1.      Mortgage Stress TestAs of October 17th, 2016 all insured mortgages, regardless of term or type, will be required to qualify at the bank of Canada posted rate.To put that in perspective:
  1. Family Income $80,000
  2. Monthly Debts     $500
  3. Property Taxes  $3,500
  4.  25 year term (Qualification rate today is 2.39% and after will be 4.64%)

    Today that family can buy a home worth approx. $393,000 but after the 17th that drops to $310,000. That is a large decrease to say the least.
    The rate you pay will not change, just the interest rate we have to use to qualify you for the loan.
    Safer LendingMortgages with a loan to value of less than 80% were not subject to the same stringent rules as those with less than 20% equity. As of November 30th, 2016 that will change and mortgages will all be subject to the same lending criteria.
2.      Closing Loopholes and Managing Tax Fairness
There is a proposed change to the tax laws on the table as well. They want to make sure that the Capital Gains tax exemption on a primary residence is not abused by either residents or non-residents buying and selling a primary residence within the same year.  This is in all likelihood an attempt to cool Toronto and Vancouver markets.
3.      Managing Risk and Protecting Tax Payers
The final piece in the announcement is a little bit unclear as to exact ramifications. Currently CMHC and the other mortgage insurers take on all the risk associated with mortgage default. They are planning to implement a consultation process on a policy option where mortgage lenders would have to manage a portion of their loss.  We will have to wait and see what exactly happens from here.

So there you have it. Getting a mortgage just got even harder and it doesn’t matter if you walk into your trusted branch or go through a mortgage broker. The rules have changed for us all.
I cannot stress enough the necessity of making sure you speak to a well-qualified mortgage professional before you make any decisions about buying or selling in case you are one of the folks affected by these changes. I will keep you up to date on any changes which come down the road.