More CMHC Mortgage Policy Changes

Jeff Evans

The government today announced a couple more changes that impact homebuyers beyond the announcements made several weeks ago. These changes will be likely adopted by the other two mortgage insurers in Canada, AIG and Genworth. In summary:

1) Rental income in subject property (the property being mortgaged) will be treated much less favorably compared to how it currently is.

2) Rental income from non-subject properties will be treated just as favorably or more favorably than before.

3) “Stated Income” self-employed people will require 10% down to purchase a home, and can only draw 85% of the equity in their homes for refinancing.

I feel that these changes are fairly hard hitting, especially for borrowers in the Greater Vancouver Area, where house prices are so high and many people need any advantage they can get in qualifying to buy a home or to refinance. Additionally, by making it easier at the same time for those who already own rental properties to qualify for more financing, it skews the property market in favor of the more affluent.

Additionally, self employed people will have a more difficult time purchasing a home unless they declare or are able to substantiate their income (usually via tax returns). I imagine this was done due to a higher default rate for those who purchased under this program. I am hoping that lenders will take the time to dig through financial statements of a company to substantiate income for qualifying purposes to mitigate the effects of these changes on self employed businesspeople.

I am personally not thrilled most of the times that decisions like this are made to make my job more difficult, and I had felt the original changes announced recently were a good balance that helps the market to stay stable. For most of the country, the changes shouldn’t effect them or their market too much, considering that a plummer making $60,000/year buying a house for $300,000 in Toronto is much easier than if he were living in Vancouver, where it is difficult to buy a 1 bedroom condo for that price.

Like the changes that were implemented in the fall of 2008, I believe that these changes could lead into a market adjustment leading into the summer. With the potential of mortgage rate increases to come due to a return to a stronger economy, I do not believe that they need to make these changes to protect home values. Canada’s mortgage lending system is already one of the safest and best in the world, and I believe the changes are generally unnecessary to protect that.

Contact me today to find out what I can do for you. Simply fill in the form below.

Author: Jeff Evans

I am a mortgage broker, hair salon owner, squash player, student, and husband, aspiring to do good for people.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Related Articles

Vancouver mortgage broker with “lower” fees
Jeff Evans
No Comments

I have had a in interesting case with a returning client who came to me recently for help with his mortgage.  As a mortgage broker in Vancouver, it is necessary to be creative in making solutions work for my clients, which currently can often involve secondary or private lending solutions.  This was a case where such creativity would be necessary.Read More

home buyer mortgage broker
First Time Home Buyers Mortgage Broker Tips And Tricks
Jeff Evans
No Comments

Among the services I provide to my clients, I consider myself to be a "first-time home buyer mortgage broker".  As a first time home buyer mortgage broker, I know how difficult it is to get into the real estate market, particularly in Vancouver, and it brings me a particular amount of job to help someone get past the challenges if being a first time home buyer.

I have recently completed an e-book and will be launching it soon.  I believe it will be very helpful for not just first-time home buyers, but for anyone who is not as knowledgeable in residential mortgage lending, about how to make your home buyer mortgage broker application appealing to a mortgage lender.

As a sneak preview, here are three tips on improving your mortgage application as a first-time home buyer.

3 Home Buyer Mortgage Broker Tips

  1. Take advantage of the home-buyers plan to fund your down-payment.  This program is not technically ONLY for first-time home buyers, but all first-time home buyers are eligible.  Under the plan, you can borrow up to $25,000 from your RRSP for the purchase of an owner-occupied residence.  If you and your spouse are both applying, then you can withdraw $25,000 each. It is a loan, so it has to be paid back over 15 years (or 1/15th of the loan will be added to income for that year).  However, there is no withholding when you withdraw it, it does not have to all be declared as income on any given year, and you don't even have to use all of it for down-payment!  You can use it for any purpose that you need it for. A good mortgage broker, like myself, can help you with some of the finer details and complex situations that often arise from these situations.
  2. Make sure you pay your bills on time. If you have a high balance on your loan, or you have a lot of debt, those also have a significant negative impact on your credit score, but you can get the bills down and there is no record of your high debt levels.  However, when you miss a bill payment, it stays on your credit bureau for 6-7 YEARS.  This not just negatively impacts your credit score, but lenders look at this when assessing risk, and they have been particularly uncompromising and (unreasonable, paranoid, strict...and other words that I cannot put in print) in the last few years.  While you likely do not have to wait 6-7 years to become bankable if you have had gone through a period of bad credit, the less negative credit on the bureau, the better. At least make the minimum required payments and you will go a long way to making yourself appealing to them.
  3. Having no credit is just as bad as having bad credit. Many people feel that not requiring credit should prove your ability to pay your bills and should be good evidence of credit-worthiness.  This is not how mortgage lenders think.  If you currently do not have any credit, then you do not have any documentation that you are an acceptable credit risk, and no matter how strong your income is, you will have difficulty obtaining a prime mortgage approval.  Make sure you have at least 3 different credit facilities in your name.  (Secondary credit cards in a spouses name are not considered acceptable for establishing your credit).

I am excited to launch my home buyer mortgage broker e-book soon, in which I go into much greater detail and give many different ideas to help home buyers prepare for home ownership, but as a mortgage broker in Vancouver, you are welcome to contact me in the meantime to discuss your circumstances and see if there are any options for you.

mortgage broker Vancouver BC
Good news regarding OSFI rule changes
Jeff Evans
No Comments

This is just a quick note to let viewers know that IF you are one of the people with 20% or more down-payment and are in a position that the new OSFI rule changes affect your pre-qualification, that I can extend the current guidelines into the new year by up to 120 days provided that I have an application and am able to get a pre-approval in place with a lender for you before January 1.Read More