Mortgage Rule Changes
I welcome Kelly Wilson today from the Wilson Mortgage team. I am excited because we’re welcoming you to another episode and I’m going to say we all need we all deserve Kelly. Listen to me for you whether you were somebody that is going all there is to know about this new program and we will decide you will do what my first is this really is all about first-time home life so Kelly is this new shared or some other things and we will promise to get those as well and the biggest pieces the shared Equity Mortgage Corporation Insurance Corporation that was harder than it used to be I kind of sidetracked there with somebody looking to purchase a first and then the other pieces so it’s really two very different things that don’t necessarily so there’s a certain amount of money. would be subject to this I believe it’s going to be to work at Amazon program that helps. 20 give you those numbers right here you’re going to be would mean that I can qualify or we can qualify for four times. So $400,000 that’s a little different and what I would qualify for if I didn’t choose the correct so what is that in actuality even though they’re helping you with your sister if I could have qualified for a $480,000 property at 4.7 * 100 and that means it is especially not what year did that works for you your offer. Of time you may want to get into the house and so I think it’s important to know right because on the new homes right we’ll talk with an interest-free loan affordability so it’s forty thousand On A New Hope come up with your 5% first time buyers like a little bit for the word there what’s 5% of $100,000 our life and he’s not stressing and being able to sleep at night fitness program elsewhere and its currents trespass rules in combination with the reduction of what you can qualify as large of a lot of the largest cities are going to be able to use this program but but at the same time I’m also limiting how much I can spend so it’s it’s that doesn’t hurt or help you do it or do you want to listen Cento which will probably roll out around when you sell that you don’t have those answers right now we just know what it looks like in order to qualify how much you have to earn alone and I know they are going to work up on sale or or approval I think the estimated about 42,000 people to use the program and only about 3,000 did so weird look up between 7 and 8% of the expected update on that program so I don’t know where they’re going to see the same thing or whether this program will have enough nuances to it that it makes it not work out that way and working certain areas and not in others like will there be certain communities where you know maybe a house is certainly the outskirts of Ottawa can still buy a nice home for 200 $300,000 in so if you’re in that price point then maybe the payment really does matter you’re not worried about your buying power you’re worried about maxing out your monthly cost for bottoming out your monthly cost right making it as low as possible based on how to repair a payment savings translate you when you need to sell the property or the initial investment right side track one sweet and not give you everything that we had right now it’s worth thinking about you know what I was going to buy in the spring but you know it actually helped the wait till September so I have a few different opinions but I’m going to say that’s going to be my final answer for sure see both sides but I think that’s the biggest thing is going to be over 20 years just looking at the glass 11-12 year and last year was a really big scare for people because there was a lot of talk about using a 2% inflation rate that the rates are going to go up 2% by December and then come December they said we’ll wait a second this is this is a huge this is how we need to change the mindset there now starting to drop you’re going to see bonds are dropping quite quickly right now and I’m hoping we’re going to be a variable variable by conversation will change every month around so if we have right now does that you know depending on what you qualify for do you really want to wait if it will hinder if you’re the person that does want to go up to the 500,000 maximize or are you under that 250 right you wanted me to take advantage of that Savings of $75 a month or $100 a month just depending where you fit rather not risk going back up in the hall until over the Long Haul of Ottawa cuz 30 years into the industry I’ve only seen the rates drop a couple years and that was in the mid-90s in there and they only dropped like a percent to 2% and the rest of the time are Market increases year-over-year over here and so War to 5% average is what Auto Assets with which island are higher and lower and slower and of course there is not a science want to send an email to pick up the phone so that we can give you that to you right now it’s really very much averaging that chances are if you wait home is going to be worth more money meaning you’re going to pay more for it and if the interest between the interest rates the program and the prices of the houses going up I think I agree with you Kelly going when you find the right away cuz we don’t want you to get into something and we certainly don’t want you to wait and they’ll be able to get into interest rates are going nowhere and has never stopped anybody from from by right so so I think there’s a lot of questions that we have in terms of the back end but if we’re still way below what the other thing investors from some of the other big cities and so now that drive me to the thing that probably three I think and I’m not sure if it’s about the order and that is real I get myself completely priced out of the market like is it going to is this brighten up 5%. If you’re somebody who’s sitting waiting to save right right or if you’re somebody who hasn’t talked to her yet so other than this right thing is actually really good news anchor primarily a lot of different and yet unless you’re sitting with 25 or $35,000 of RSV to be able to borrow a game which is fantastic because you don’t get bored and yet you don’t have it we don’t see a lot of our first time buyers having the ability to max out the 25000 as an investment right I hope you don’t want you to feel that you can also have one or two of the same time so program together at some point they’re going to have to get it all back right right though it’s really just ability to take it out tax free today right right to buy this home and then you do have to pay this back over the next 17-year as big as me off and see and I think we were talking about this yesterday today and that is two to three thousand dollars for this winter in 35 give somebody the different ways that you can pull the 5% together when we do have we still have Flex down with a lot of people don’t know where you can actually if you have a good enough credit we still have some financial institutions that will let you put the line of credit that you have an unsecured and utilize that as your 5% count so it’s it’s called and is illegal at 100% bored rather than that you’re making on the ratio so it will affect again you’re buying power slightly right but certainly a good way to jump in and and and take advantage of us if you can do an interest only loan just pay it down as you want right and I guess you that my percentage does it is really like with with the 25 year amortization so that is the maximum 5% down you do you have a bit of flexibility in terms of as quickly or as slowly as you want as long as you make the minimum payment service so go to the bank get the RSV long does a refund for you than you can wait call Flights are going to be 60923 for months so you can actually put it all into motion I think the big one see that we got a lot of calls on is already used my ability to buy at 5% down a big one so if you have before you can go to 5% down on another 5% down can be utilized multiple times and then go get another 20% right minimum sometimes people’s money on other people’s money at either of us cuz we would love to answer that and Kelly really does have lots of assistance to helping buyers with this may have one either Waters were only cleared it up with you so you can reach out to Kelly and Kelly Wilson and she will help you out dresses been helpful like I learned some things you learned some things so we are excited to be together we really got this and it’s interesting that this is scary it’s okay cuz there are scary things that we have to do a journey through life together and so let’s do this thing well together.
What it is
As of Oct. 17, a stress test used for approving high-ratio mortgages will be applied to all new insured mortgages – including those where the buyer has more than 20 per cent for a down payment. The stress test is aimed at assuring the lender that the home buyer could still afford the mortgage if interest rates were to rise. The home buyer would need to qualify for a loan at the negotiated rate in the mortgage contract, but also at the Bank of Canada’s five-year fixed posted mortgage rate, which is an average of the posted rates of the big six banks in Canada. This rate is usually higher than what buyers can negotiate. As of Sept. 28, the posted rate was 4.64 per cent.
Other aspects of the stress test require that the home buyer will be spending no more than 39 per cent of income on home-carrying costs like mortgage payments, heat and taxes. Another measure called total debt service includes all other debt payments and the TDS ratio must not exceed 44 per cent.
Who it affects
This measure affects home buyers who have at least 20 per cent for a down payment but are seeking a mortgage that may stretch them too thin if interest rates were to rise. It also affects lenders seeking to buy government-backed insurance for low-ratio mortgages.
The government is responding to concerns that sharp rises in house prices in cities like Toronto and Vancouver could increase the risk of defaults in the future should mortgage rates rise.
What it is
The new rules restrict insurance for these types of mortgages based on new criteria, including that the amortization period must be 25 years or less, the purchase price is less than $1-million, the buyer has a credit score of 600 and the property will be owner-occupied.
Who it affects
This measure appears to be aimed at lowering the government’s exposure to residential mortgages for properties worth $1-million or more, a category of the market that has increased sharply in recent years in Vancouver and Toronto.
Vancouver and Toronto are the two real estate markets that are of most concern for policy makers at all levels of government. These measures appear to be targeted at those markets.
What it is
Currently, any financial gain from selling your primary residence is tax-free and does not have to be reported as income. As of this tax year, the capital gains tax is still waived, but the sale of the primary residence must be reported at tax time to the Canada Revenue Agency.
Who it affects
Everyone who sells their primary residence will have a new obligation to report the sale to the CRA, however the change is aimed at preventing foreign buyers who buy and sell homes from claiming a primary residence tax exemption for which they are not entitled.
While officials say more data are needed, Ottawa is responding to extensive anecdotal evidence and media reports showing foreign investors are flipping homes in Canada and falsely claiming the primary residence exemption.
What it is
Currently, the federal government is on the hook to cover the cost of 100 per cent of an insured mortgage in the event of a default. The federal government says this is “unique” internationally and that it will be releasing a public consultation paper shortly on a proposal to have lenders, such as banks, take on some of that risk. The Department of Finance Canada acknowledges this would be “a significant structural change to Canada’s housing finance system.”
Who it affects
Mortgage lenders, such as banks, would have to take on added risk. This could potentially lead to higher mortgage rates for home buyers.
The federal government wants to limit its financial obligations in the event of widespread mortgage defaults. It also wants to encourage prudent lending practices.
Five previous federal housing moves since 2008
July, 2008: After briefly allowing the CMHC to insure high-ratio mortgages with a 40-year amortization period, then Conservative finance minister Jim Flaherty moved to tighten those rules by reducing the maximum length of an insured high-ratio mortgage to 35 years.
February, 2010: Responding to concern that some Canadians were borrowing too much against the rising value of their homes, the government lowered the maximum amount Canadians could borrow in refinancing their mortgages to 90 per cent of a home’s value, down from 95 per cent. The move also set a new 20-per-cent down payment requirement for government-backed mortgage insurance on properties purchased for speculation by an owner who does not live in the property.
January, 2011: The Conservative government under Stephen Harper tightened the rules further, dropping the maximum amortization period for a high-ratio insured mortgage to 30 years. The maximum amount Canadians could borrow via refinancing was further lowered to 85 per cent.
June, 2012: A third round of tightening brought the maximum amortization period down to 25 years for high-ratio insured mortgages. A new stress test was also introduced to ensure that debt costs are no more than 44 per cent of income for lenders seeking a high-ratio mortgage. Refinancing rules were also tightened for a third time, setting a new maximum loan of 80 per cent of a property’s value. Another new measure limited the availability of government-backed insured high-ratio mortgages to homes valued at less than $1-million.
December, 2015: The recently elected Liberal government moved to tighten lending rules for homes worth more than $500,000, saying it was focused on “pockets of risk” in the housing sector.
The package of measures included doubling the minimum down payment for insured high-ratio mortgages to 10 per cent from 5 per cent for the portion of a home’s value from $500,000 to $1-million.
Hi this Kelly Wilson from the Wilson Team your Ottawa mortgage experts and I just wanted to make a quick video regarding the new mortgage rule changes taking effect on January 1st 2018.
Regarding a 40% down payment. So if you put 20 percent, 30 percent or 40% down this is going to affect you if you’re putting don’t worry you guys already did that stress test last year. so basically it’s a conventional putting more than 20% down currently you’re being qualified at the contract rate so chirping qualify. On January 1st we have to act as if you’re paying 4.99% so even though you’re paying $299 we have to act as if you’re going to pay $499 so it’s 2% over the contract rate of interest rate but essentially we have to act as if you’re paying $1,500 instead of the $1,200 the second person is going to affect his anybody who is Ed wants to change financial institutions I want to be really clear if you don’t qualify to change financial institutions do not have to undergo the stress test to stay exactly where you are you’re not Bank lenders wherever your wit and it won’t be a stress test has to be undergone if you don’t qualify to move just stay put on your home that is going to affect you will not be able to qualify for which means you have to be making 20 to 25% for income to get the exact same mortgage amount that you have today so if you have any questions on I also wanted to clear that in order to get under the wire the biggest question we have is do I have to close my house or do I have to close everything before dinner for so you have to have an accepted offer to purchase you have to be in agreement to purchase a house you can close anytime before we only have two financial institutions that agreed to do pre-approvals that if you didn’t find the home of your dreams to buy for January 1st a lot of people there are restrictions too. So make sure you give us a call to understand what those restrictions are change or anybody else that that may want to jump on board with that with approvals will let you know we’ll keep you informed 613-695-9250 thanks for listening.