Monday July 9th, 2012
It is clear from the changes that have been implemented over the past 4 years that the Government is clearly targeting a few areas of mortgage lending that it feels would best deal with the housing market that just seems to continue chugging along.
For those of you who aren’t fully aware of these changes here is a recap:
1.The maximum amount you can borrow when refinancing your home has been decreased from 85% of the value of your home to 80%.
2.The maximum amortization that you can have on your home is now 25 years, down from 30 years.
3.You will no longer be able to insure a mortgage if it is greater than $1 million.
4.A reduction of the Gross Debt Service ratio from 44% to 39%.
Tuesday 10 July 2012
Wednesday 27 June 2012
Housing Finance - Big Changes are Coming!
Three months ago, Finance Minister Jim Flaherty told banks to tighten lending on their own. Now he’s doing it for them. The Department of Finance released a number of mortgage rules last Thursday that will mean large changes to housing in the years to come.
Their main purpose for these changes is to slow down the booming housing market, by restricting buying power, and reduce household debt without increasing interest rates. To stop there being a rush to get a mortgage prior to the rule changes, the government only gave until July 9th to implement the changes. So, if you haven’t made your purchase offer prior to this date and submitted for approval the changes may affect you.
So what are these changes?
1)High Ratio mortgages (less than 20% down payment) must have an Amortization of 25 years or lower. This was previously 30 years.
2)In order to qualify for a mortgage your GDS (Gross debt service ratio) must be below 39% down from 44%. This will lower the maximum mortgage some people can qualify for.
3)Refinances may now only go up to 80%LTV (Loan to Value) thus reducing the amount of equity you can access in your property.
4)Mortgages over $1 million can no longer be insured. Flaherty said ‘If someone can afford to pay a million dollars… they don’t really need CMHC. That’s not what CMHC is there for.”
5)Cash back down payment mortgages look to be a thing of the past. Those people without a 5% down payment are now removed from the market.
Their main purpose for these changes is to slow down the booming housing market, by restricting buying power, and reduce household debt without increasing interest rates. To stop there being a rush to get a mortgage prior to the rule changes, the government only gave until July 9th to implement the changes. So, if you haven’t made your purchase offer prior to this date and submitted for approval the changes may affect you.
So what are these changes?
1)High Ratio mortgages (less than 20% down payment) must have an Amortization of 25 years or lower. This was previously 30 years.
2)In order to qualify for a mortgage your GDS (Gross debt service ratio) must be below 39% down from 44%. This will lower the maximum mortgage some people can qualify for.
3)Refinances may now only go up to 80%LTV (Loan to Value) thus reducing the amount of equity you can access in your property.
4)Mortgages over $1 million can no longer be insured. Flaherty said ‘If someone can afford to pay a million dollars… they don’t really need CMHC. That’s not what CMHC is there for.”
5)Cash back down payment mortgages look to be a thing of the past. Those people without a 5% down payment are now removed from the market.
Friday 13 April 2012
Planning to use a HELOC to invest?
Concerned of mortgage professionals are calling on banking regulators to shift their focus away from tightening mortgage lending rules and toward strengthening the underwriting on unsecured debt.
The argument may be loss on the Office of the Superintendent of Financial Services as it prepares to bring in a slew of new, more rigid guidelines for banks and other mortgage providers.
Of immediate concern to brokers is its intention to increase the equity requirements for homeowners seeking HELOC (Home Equity Lines of Credit) – something that could remove that option for Canadians in desperate need of debt consolidation.
“This guideline change (moving the equity minimum from 20 per cent to 35 per cent) would create an artificial crisis by removing the recourse some homeowners now have to consolidating unsecured, high-interest debt into secured, low-interest debt,” said Ad Lakhanpal, an Oakville-based broker with Mortgage Alliance. “Lenders are already asking borrowers questions about what they intend to use HELOC funds for to ensure it’s not being abused.”
The comments jive with those of other brokers reacting to proposed guideline changes now being floated by the Office of the Superintendent of Financial Services. The watchdog wants to lower the maximum loan-to-value of uninsured home equity lines of credit to 65 percent from 80 percent. This will reduce the temptation for the borrower to continue to borrow to the maximum of the home's value, but it will also reduce the ability for individuals to borrow to INVEST.
“The federal government already instituted tougher guidelines for qualifying for HELOCs and lenders already use stricter lending guidelines, including net worth tests, property valuation tests, and credit scoring to ensure that HELOC borrowers are the best of the best,” Gord McCallum, owner of First Foundation Residential Mortgages, told MortgageBrokerNews.ca.
The argument may be loss on the Office of the Superintendent of Financial Services as it prepares to bring in a slew of new, more rigid guidelines for banks and other mortgage providers.
Of immediate concern to brokers is its intention to increase the equity requirements for homeowners seeking HELOC (Home Equity Lines of Credit) – something that could remove that option for Canadians in desperate need of debt consolidation.
“This guideline change (moving the equity minimum from 20 per cent to 35 per cent) would create an artificial crisis by removing the recourse some homeowners now have to consolidating unsecured, high-interest debt into secured, low-interest debt,” said Ad Lakhanpal, an Oakville-based broker with Mortgage Alliance. “Lenders are already asking borrowers questions about what they intend to use HELOC funds for to ensure it’s not being abused.”
The comments jive with those of other brokers reacting to proposed guideline changes now being floated by the Office of the Superintendent of Financial Services. The watchdog wants to lower the maximum loan-to-value of uninsured home equity lines of credit to 65 percent from 80 percent. This will reduce the temptation for the borrower to continue to borrow to the maximum of the home's value, but it will also reduce the ability for individuals to borrow to INVEST.
“The federal government already instituted tougher guidelines for qualifying for HELOCs and lenders already use stricter lending guidelines, including net worth tests, property valuation tests, and credit scoring to ensure that HELOC borrowers are the best of the best,” Gord McCallum, owner of First Foundation Residential Mortgages, told MortgageBrokerNews.ca.
Tuesday 13 March 2012
The Devil's Best Tool
I came upon a short story this morning I thought was worthy of repeating here.
In the old fable "The Devil's Best Tool" the Devil is going out of business and is selling all the tools of his trade. for sale are such implements such as the hammer do hatred, the scythe of spite, the maul of malice and the dagger of deceit. As one would expect, the Devil's tools are all ominous, but oddly the highest price item in his arsenal is an extremely worn and harmless-looking wedge. When asked why it was so expensive, the Devil slowly smiles and replies, "To be totally candid, this may be my most powerful weapon of all. I call it the wedge of doubt. When all my other tools fail me, I know I can always rely on doubt and discouragement to break the heart and shatter the will of man."
The moral of this fable is: Don't the underestimate the devastating power of doubt to keep you from becoming and doing your best.
In the old fable "The Devil's Best Tool" the Devil is going out of business and is selling all the tools of his trade. for sale are such implements such as the hammer do hatred, the scythe of spite, the maul of malice and the dagger of deceit. As one would expect, the Devil's tools are all ominous, but oddly the highest price item in his arsenal is an extremely worn and harmless-looking wedge. When asked why it was so expensive, the Devil slowly smiles and replies, "To be totally candid, this may be my most powerful weapon of all. I call it the wedge of doubt. When all my other tools fail me, I know I can always rely on doubt and discouragement to break the heart and shatter the will of man."
The moral of this fable is: Don't the underestimate the devastating power of doubt to keep you from becoming and doing your best.
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