DLC Regional Mortgage Group Oct.04.2016.
- -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
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.
As 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:
- Family Income $80,000
- Monthly Debts $500
- Property Taxes $3,500
- 25 year term (Qualification rate today is 2.39% and after will be
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.Mortgages 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.
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.