Mortgage Rules Changing Again!

CENTUM Canada
Here we go again. The Office of the Superintendent of Financial Institutions had proposed new guidelines for mortgage underwriting back in March and final Residential Mortgage Underwriting Practices and Procedures were released to financial institutions today. Along with these, the Department of Finance announced new mortgage rule changes in an effort to limit the debt Canadians are amassing and to cool the housing market. Four new changes will come into effect July 9, 2012.

Reduce the maximum amortization period to 25 years from 30 years.

By reducing the amortization period, people will face higher monthly payments, but are expected to be debt free faster. An example of how this will affect Canadians was given by IMBA president, Albert Collu when speaking with MortgageBrokerNews.ca. "Reducing an amortization for a $300,000 mortgage at 3.29% from 30 years to 25 years is a difference of approximately $156," said Collu.

Lower the maximum amount Canadians can borrow when refinancing to 80 per cent from 85 per cent of the value of their homes.

This move is trying to encourage homeowners to manage borrowings against their homes. For most homeowners, this change will not make a lot of difference.

Fix the maximum gross debt service ratio at 39 per cent and the maximum total debt service ratio at 44 per cent.

The two ratios mentioned are to determine affordability by CMHC. The gross debt service ratio looks at a person's monthly housing costs in comparison to their gross monthly income. The total debt service ratio looks at a person's entire monthly debt load compared to their gross monthly income. This ratio includes housing costs and all other debt payments like car loans and credit card payments.

Limit the availability of government-backed insured mortgages to homes with a purchase price of less than $1 million.

Based on MLS data CMHC forecasted the national average resale price of a home to be $372,700 in 2012 and $383,600 in 2013. Borrowers purchasing $1 million homes will be required to pay a down payment of 20% or more. There are still many mortgage options available for homeowners and buyers. Find out what mortgage products are right for you.

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First Time Home Buyers Mortgage Broker Tips And Tricks
Jeff Evans
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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.

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Good news regarding OSFI rule changes
Jeff Evans
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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

OSFI B20 mortgage guideline changes 2017 – Part 2
Jeff Evans
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This is a continuation of the article published here about the OSFI B20 morgage guidline changes for 2017.

If you are familiar with mortgage brokers at all (which you probably aren't) you would know that we also have alternative sources of lending for situations where a mortgage borrower will not qualify with a prime institution.  We have what we call "B" lenders, who have higher rates but more flexible lending criteria, and we have private lenders, which are individuals and corporations who can lend money on on anything that suits them.Read More