New qualifying federal mortgage rules changes

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New qualifying mortgage rulesNew qualifying federal mortgage rules changes

On October 3rd, Bill Morneau, Minister of Finance announced “Preventative measures for healthy, competitive and stable housing market”. The intention is to address the growing household debt and rapidly rising house prices.

Learn about the new qualifying federal mortgage rules changes that will affect your mortgage affordability during the qualification process and what can you do to qualify for that mortgage that you are seeking

The new rules affect the CMHC insured and Low Ratio Bulk Insured Mortgages.

These new rules might definitely affect the housing market as intended, affecting also a through the qualification process a great number of borrowers with intentions to purchase a home or to renew their current mortgage.

How are these changes affecting you as a borrower and most important what can you do right now to avoid negatively affected?

The following links explain both affected types of mortgages Select the type of mortgage that you would need to purchase of to refinance your current.

What kind of mortgage do you need information about?

For new home buyers, new mortgage rules select according to the amount of your downpayment. Under 20% down payment = high ratio mortgage. Over 20% down payment = low ratio mortgage

New rules high ratio mortgageHigh ratio (less than 20% of downpayment) home purchase or refinance
New rule low ratioLow ratio (more than 20% of downpayment) home purchase or refinance

You can also apply on line now or Call or text 416-262-7139 and request a confidential one on one meeting to look at specific answers and help you get the best mortgage deal.

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New rules affecting low ratio mortgages

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New rules low ratio mortgageNew rules affecting low ratio mortgages

The new rules affecting low ratio mortgages or mortgages backed by portfolio insurance are effective from November 30th, 2016.

The following are new mortgage rules for low ratio mortgages, (Over 20% down payment = low ratio mortgage)

The new refinancing rules have been postponed to start taking effect on May 1, 2017,

New eligibility requirements for low-ratio mortgages to be insured will include:

  • A loan whose purpose includes the purchase of a property or subsequent
    renewal of such a loan;
  • A maximum amortization length of 25 years;
  • A maximum property purchase price below $1,000,000 at the time the loan
    is approved;
  • For variable-rate loans that allow fluctuations in the amortization period,
    loan payments that are recalculated at least once every five years to
    conform to the original amortization schedule;
  • A minimum credit score of 600 at the time the loan is approved;
  • A maximum Gross Debt Service ratio of 39% and a maximum Total
    Debt Service ratio of 44% at the time the loan is approved,
    calculated by applying the greater of the mortgage contract rate or the Bank
    of Canada conventional five-year fixed posted rate; and,
  •  A property that will be owner-occupied.

A benchmark test rate will be applied to qualify.

Scenario:

A $500,000.00 mortgage at an annual benchmark rate of 4.64% (This is a test rate) on a 25 years amortization will require a monthly payment of $2,806.41

A $500,000.00 mortgage at an annual contracted rate of 2.39% on a 25 years amortization will require a monthly payment of $2,212.53. (This would be the real payments)

What should you do at this moment?

There is no one single financial move as each borrower has different needs and different circumstances,  however with you should apply on line now or call or text 416-262-7139and request a confidential one on one meeting to look at specific answers and help you get the best mortgage deal. Delays to take action may cost you! Don’t delay!

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New rules affecting high ratio mortgages

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New mortgage rules high ratioNew rules affecting high ratio mortgages

The new rules affecting high ratio mortgages are effective from October 17th, 2016.

The following are new mortgage rules for high ratio mortgages, (under 20% down payment = high ratio mortgage).

From October 17th, 2016 onwards all borrowers (including those seeking a mortgage with a 5 year or longer fixed rate, insured mortgage with a variable rate, fixed under 5 years term) will need to qualify at the benchmark rate set by the Bank of Canada (currently at 4.64%) even if the mortgage loan will carry a lower mortgage rate. The monthly payments will consider the agreed rate (not the 4.64% benchmark rate)

Scenario:

A $500,000.00 mortgage at an annual benchmark rate of 4.64% (This is a test rate) on a 25 years amortization will require a monthly payment of $2,806.41

A $500,000.00 mortgage at an annual contracted rate of 2.39% on a 25 years amortization will require a monthly payment of $2,212.53. (This would be the real payments)

Simply put: Well qualifying borrowers that before the new rules were able to qualify for a certain amount mortgage, will qualify for a lesser amount mortgage after October 17th, 2016 when the new rules take effect.

The periodic payments maybe the same amount as they are factoring the loan amount, the contracted mortgage rate and the amortization period, once the mortgage is approved.

What can you as a borrower interested in a mortgage do now?

  • Increase considerably your down-payment.
  • Increase your qualifying income.
  • Look for an alternative property.
  • Try to keep your debt low and your credit high.

As of October 17, 2016, all insured mortgages regardless of the term must be qualified at the Bank of Canada Benchmark rule (currently at 4.64%)

What should you do at this moment?

There is no one single financial move as each borrower has different needs and different circumstances,  however with you should apply on line now, call or text 416-262-7139and request a confidential one on one meeting to look at specific answers and help you get the best mortgage deal. Delays to take action may cost you! Don’t delay!

The new refinancing rules have been postponed to start taking effect on May 1, 2017,

Do you have questions or need assistance with your mortgage?

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A Co-signer story

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A co-signer story Considering co-signers to help your mortgage may be a very smart thing to do in regards to money-saving, however, this advantage may come with some potential risks that may end up consuming some of those savings or even worse, potential legal conflicts.

A good family that I know wanted to buy a house to stop renting, they had been renting for a long while and they wanted to start owning, however, their income was insufficient to prove affordability to a lender that they would be able to repay the requested mortgage. They have saved for their down payment, their credit was ok, It was only the insufficient income.

They approached a good friend in whom they trusted enough to ask to help them being a co-signer so that they could qualify to purchase the home for their family. He would need to commit to their mortgage obligations and responsibilities, except that he wouldn’t be paying the monthly mortgage payments unless the couple couldn’t make them.

The family was able to qualify and purchase their home, they were able to make the payments and live a better life, build some wealth and save more money than when renting. The co-signer was offered a very small percentage of the value of the property for the diligence of being included in the property title.

Suddenly, the good friend that was the father to a teenager passed away, this brought some complications and extra legal work and expenses to the family a couple of years after as they were planning to refinance their mortgage, and they needed to remove the co-signer from the title.

This is an example why it is wise to accept the mortgage protection plan offered with your mortgage.

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Dufferin County Homeownership

Dufferin County HomeownershipThe Dufferin County Homeownership Component program is designed to provide moderate income individuals and families with an interest-free down payment assistance loan to help them in purchasing their own home.

The Dufferin County Homeownership is an affordable housing program and might provide you with an interest-free down payment assistance loan of up to five percent (5%) of the cost of an eligible home, to a maximum of $20,000.00.

 To be eligible for down payment assistance you must be a renter household and meet the following criteria:

  • Combined gross household income at or below $88,000
  • Must not currently own a home or have a legal interest in a property
  • Must be buying a sole and principal residence within the County of Dufferin
  • Have assets of no more than $20,000.00
  • Must not owe any social housing arrears, including damages
  • Be a minimum 18 years of age
  • Be able to secure financing on the property

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Gifted down payment

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Gifted Down PaymentGifted down payment

Gifted down payment are funds given to a mortgage applicant by an immediate family member to be used to qualify for a mortgage or simply to lower the mortgage amount. It is a very common and popular mechanism used by parents or siblings to support their family members financially without expecting the support being paid back

If you are planning to buy a home using a gifted down payment, you need to understand who can this Gifted down payment may come from, and, what are the mechanisms to be followed for it to be accepted.

The Government of Canada recently announced the minimum down payment requirement will be increased from 5% to 10% on the portion of a purchase price for a property that is above $500,000 but less than $1 million on insured mortgages. This change will take effect on February 15, 2016.

May I help you with your mortgage?

 

Who can offer a Gifted down payment?

Immediate family members (i.e. parent, grandparent or sibling). Gifts from spouses are not acceptable.

How can a Gifted down payment be used?

A Gifted down payment can be used provided that the funds are properly verified, are non-repayable and all other characteristics of the borrower are acceptable. In most cases Gifted down payment is required to be on the applicants’ account 15 days until the time of closing.

A letter must contain the following information

  • The amount of the gift
  • A statement that the gift is non-repayable and is from non-borrowed funds
  • The full names of the mortgagor and Giftor (s),
  • The relationship between the mortgagor and the giftor(s) and
  • The reason for the gift.
  • The deposit or cheque confirming the funds have been received must be obtained.

Acceptance of Gifted down payment is subject to verification

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Downpayment from RRSP’s

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down-payment from RRSP’s

DownPayment From RRSPIf you as a first-time home-buyer are planning to buy your home this year and are facing the question of where will you get the down payment from? This article is for you.

One can only admit that the advantages given, by the Government of Canada when it comes to promoting homeownership are fabulous; opportunities like this should be seized, especially by those whose finances have been tight before, not allowing enough savings being allocate towards the down payment of that home that is most needed now in order to stop renting, and contributing to the payments of someone else’s mortgage. Why not contribute to the payments of your own mortgage instead?….Before it gets harder!

The Government of Canada recently announced the minimum down payment requirement will be increased from 5% to 10% on the portion of a purchase price for a property that is above $500,000 but less than $1 million on insured mortgages. This change will take effect on February 15, 2016

Getting the down payment from your RRSP’s is a very smart strategy that makes way to a greater downpayment, it requires a careful planning and commitment but it works beautifully, the greater your down payment is, the better the mortgage is for you, try it!

Do you want me to help you with your mortgage?

 

The next is just an intro on how it could work for you:

  • Read your T4’s just received by your employer, or your last week of December’s pay stub find out how much taxes you have been already deducted, and that you possibly consider now gone.
  • Calculate here what you have earned, the taxes that you have already paid and see  enter an amount that you are eligible to contribute towards your RRSP’s (see your last’s year notice of assessment from Revenue Canada), you may still add more than what you are eligible for.
  • If your tax return increases then this plan should work wonders for you.
  • Submit your online mortgage assessment application and start your process that will start sharpening numbers to give you clarity as of when you can afford to buy your home, how much you can afford, how much taxes you can save and how much returns you can also get in the following year.

You are on time to recuperate those taxes that you were already deducted from your paycheck, do not procrastinate and sieze the opportunity now!

Once we practice your mortgage assessment you will be in a better position to decide is this strategy works for you, you will also have a greater knowledge to visualize when you will finally be able to purchase your home. Not every family’s financial situation are the same, your situation is unique, that is why your mortgage assessment should be unique as well

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Home purchase assist program

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Purchase Assist program - First Swiss MortgageHome purchase Assist program from First Swiss Mortgage Corporation

First Swiss Mortgage will lend a second up to 95% LTV, that client can use to reduce the first mortgage amount below CMHC margin. Which means – no CMHC premiums, and less down-payment form client’s own sources

Not everyone can afford 20% down-payment, especially at the current property price level. That’s exactly why First Swiss Mortgage came up with Purchase Assist – a handy second mortgage product designed to make it easier for the would-be home buyers to get a dream home they always wanted.

Learn more about First Swiss Mortgage

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Financial character

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Character

Financial character

Financial character is the mental and moral group of qualities presented by an individual in regards to his/her behaviors when it comes to his/her financial agreements.

Your credit score may not be good enough to qualify for a mortgage!
Your high income may not be sufficient to qualify for a mortgage!

Have you suffer disappointments or being declined for a mortgage even when your credit score is higher than others?

Do yo have a high income, yet have being declined for a mortgage or are currently paying high interest rates?

Learning how financial character affects your ability to qualify or to obtain better mortgage rates means a great deal of money in your pockets.

Understanding that money is not everything should very important to you as it is to the financial institutions or lenders that you will seek a loan from.

Your credit score may not be good enough to qualify for a mortgage!

It is in the way your earn money and the way you use it that you create behaviors and may tell of what you give priority when you spend, how respectful and committed you can be to a promise made when requesting a loan, and what capacity you have to continue repaying a long term debt that you are asking for.

To some people making money is very easy at a time, but spending more than what they make maybe easier, to them going into credit card’s debt may be not important because they can pay the money back (at first) but without a conscience, of repaying with respect to the institution that lent them the money and the integrity to recognize that the lending and repaying transactions are a mutual commitment, the behavior patterns of those people most likely will lead to a higher un-affordable debt.

Some people pay on time and what is agreed their mortgages, but fail to do the same with their telephone or utility bills or car loan or others, this deteriorates the character of the borrower.

Paying responsibly, with consistency, on time and agreed amount (that is not yours, yo borrowed it) with consistency to all who you have celebrated a financial agreement with, will help you build a pattern of good character, one that respects financial institutions and that is always observed by the lenders when requesting a mortgage loan.

Your high income may not be sufficient to qualify for a mortgage!

Some people may have a high income, yet they may have previous commitments to car and student loans, credit cards, other monthly commitments and may not see in time that their debt ratios are getting out of hand as what they make or more is already committed.

The above example is common and may be as a result of poor management of their income.

Some people may be earning enough money to afford mortgage payments but may not be able to document all their income, this represents a higher risk for the lender. Different lenders have different appetite for risk and therefore some people may be able to support their income in different ways and qualify for a mortgage loan, but the borrower needs to understand that a higher risk means a higher interest rate in their mortgage loan.

There are also people earning good money but not capable to save for the down payment on their own, and have no assets, so where does the money go?

May I help you with your mortgage?

All this examples and a thousand more that you may be familiar with, are considered as factors that build a financial character in a person by his/her own, and are always considered by the lenders when underwriting before they decide to approve or decline a mortgage loan.

Keeping a good financial character helps you project a good image of your self when it comes to requesting a mortgage loan, it shows your respect to your agreements, to, other people, to institutions and mainly to your own commitments

With a good financial character, you could picture yourself as the client all lenders want to have in their portfolio, it gives everyone a peace of mind, you would be a promise of a long lasting relationship, it is good business for everyone, and it means to you a great deal of savings.

Get the strategy you need to achieve your financial goal of investing on real estate, take the next step, get your mortgage assessment for free

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35,000 home buyers plan

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35K Home Buyers Plan35,000 home buyers plan

Raising the amount allowed to be borrowed from your RRSP’s savings account from 25,000 to 35,000 to be used as a home down payment is a “Plan” that one of the candidates for the prime minister’s office is looking to champion

So far this is only a “Plan”, but how interesting is that to you as a borrower?

How does contributing to your RRSP savings account helps you?

  • Saving for your retirement
  • Gaining generous dividends from your savings
  • Tax shelter (Differing paying taxes until you reach retirement age)
  • Borrow from your RRSP savings towards the down payment of your home

May I help you with your mortgage?

 

Tax sheltering works in the following way:

If an employed person makes 50,000 a year, he/she will be deducted about 8,000, (check your T4 at the end of the year) if that person is able to contribute 10,000, before the end of the year or March 1 or Feb 29 on leap years, then after filing taxes, the return for this contributions should be around 1,800+

(These values are not guaranteed to be accurate. For informational purposes only)

Repeat this operation for a couple of years more and you’ll have saved a substantial home down payment, and don’t forget that this are amounts per person, if you area couple, you can add to the equation the correspondent amounts of the second person.

Your RRSP’s contributions plus their gains can be borrowed towards the home down payment after they have been in your account for at least 90 days

Does the “Plan” motivates you to increase your RRP’s contributions with the intention of using them later as your down payment to purchase a home?

Below you’ll find a quick poll that will help us all get a more general perspective, the more people participates, the greater perspective of the choice we all may have, so feel free to share this link with those you know

 [socialpoll id=”2290157″]

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Home sale prices in Ontario

Home sale prices in Ontario

Is it really worth it to buy a house? That is a question that some renters that I have come across with have or had, like John and Sue (not real names) from Toronto, who were renting because they never thought that they could buy a house considering their financial situation. After our first meeting at that corner coffee shop (it was very crowded by the way), they felt comfortable enough to take the next step

The next step was, to decide whether to start their mortgage assessment or not, they decided to go ahead as they had nothing to lose and now they own a condo on a 15th floor that is more comfortable than the apartment they were renting and in a safer area; their mortgage payments are currently lower than what they were paying as rent.

The following chart from CHMC, illustrates in a simple way the average home sale prices in Ontario, includes a forecast for the years 2013 & 2014.

What you as a borrower can take from this is that, those who in the past years, were able to invest in a real estate and capable of keeping their investment, have now benefited by the growth of their equity, even through the slow economy that we lived in the past few years.

In the graph, as we observe a steady increase in home sale prices, we should also consider the savings resulting from low mortgage rates (not expressed in the chart below).

The growth of wealth in equity offered by the residential real estate industry, should be considered as a clear message, and an invitation to those who are currently renting, to invest securely and buy their homes now, rather than later.

Situations that prevent renters from buying a home like, low credit, no initial down payment, low income and others can be overcomed with a clear and solid strategy and here is where I can help you.

Home Sale Prices in Ontario

Source CHMC

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 Contact your mortgage agent

Owner occupied rental

Owner Occupied Rental

The owner occupied rental mortgage offers the flexibility needed to own a property while renting a fraction of it to someone else, so you can use the rental income to help repay your mortgage.

The owner occupied rental mortgage is normally used by small but growing families when their own income alone may not be sufficient to qualify for the property you need.

This type of mortgage gives you the advantage to qualify for a bigger property than what you can afford with your income

Not all properties and not all rental agreements may qualify for this type of mortgage, ask me before buying the property.

The owner occupied rental is available for purchases or refinance.

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Non owner occupied rental mortgage

Non Owner Occupied Rental

The non owner occupied rental mortgage loans help you qualify by adding the monthly rental income to your current income. As a result you are able to purchase or refinance a rented property and let the property pay for itself with the rent

Scenario: You currently have a steady job or business, a decent credit score, some savings but no time to start another business or job, and you would like to earn residual income from a real estate property.

The non-owner occupied rental mortgage is designed for those who would like to become real estate investors.

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New To Canada Mortgage

 

New To CanadaNew to Canada Mortgage is for people who have immigrated or relocated to Canada within 60 months, offers credit record or history flexibility, lower down payment required than a conventional mortgage.

The New to Canada  mortgage is for the new immigrants that have obtained landed status and have not already owned a house It presents the opportunity to start owning a home instead of renting.

The following are some borrower qualifications for the New to Canada Mortgage:

  • High ratio secured mortgage loans with only 5% Down payment from own resources; For LTV’s less than 95%, the remainder may be gifted from an immediate family member or from a corporate subsidy. (3 years landed immigrant)
  • Or Conventional unsecured mortgage loan with 35% Down payment or more from own resources.
  • Amortization up to 30 years in Conventional & 25 years insured mortgages
  • No 3rd party/Guarantors

  • Number of units, Max 2

  • Must provide valid work permit or verification of landed immigrant status

  • International Credit Report or 2 alternative sources of credit

  • Bank reference letter or 6 months bank statements
  • 3 months minimum full-time employment in Canada (borrowers being transferred under a corporate relocation program are exempt)
  • All debts held outside of the country must be included in the total debt servicing ratio (Rental income earned outside of Canada is to be excluded from the GDS/TDS calculation)
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Cash Back Mortgage

Cadh Back MortgageCash back mortgage is a convenient mortgage loan use to purchase a home and get additional financing for other purposes at low mortgage rates, that are generally lower than the rates on the credit cards

Different percentages of cash back (1%, 2%, 3%, 4%, 5%) are offered by different lenders, some mortgage lenders allow you to use your cash back to purchase new furniture for your new home, home remodeling or restorations, some for legal fees and some even for down payment.

With a cash back mortgage, you extend the repayments through your mortgage amortization period making it easy to repay

Cash-Back MortgageIn a cash back mortgage, the mortgage rates may not be as low as in a conventional mortgage where at least a 20% of the purchase price of the property has to be invested upfront by the borrower, however, the rates are much lower than other financing channels like credit cards or personal loans.

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First mortgage

First MortgageFirst mortgage is the first loan registered on the real estate title.

Looking to buy your first home?

Save thousands on your first mortgage, know your options & get approved

Other mortgage loans can also be registered on the same property title, they would be called second or third mortgages

Reading the following will help you get approved when applying for your first mortgage

You are excited about buying your home and wouldn’t like disappointments, if this is the case read the following:

  • Is smart to have your mortgage assessment practiced before you start viewing homes, that way you’ll know what you can or can’t afford.
  • Learn about the unique advantages you are entitled to if you are a first time home buyer
  • Learn about your credit and mortgage loans and credit score
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