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Update! Lending Rules Changing.

September 21, 2012

New Mortgage Rules: What do they mean for you?

On June 21, 2012 the Canadian Government announced another round of mortgage rule changes affecting high ratio mortgages (mortgages greater than 80% loan to value) effective July 9; at the same time, OSFI (Office of the Superintendant of Financial Institutions) announced several changes affecting all other Canadian Banks effective no later than December 31.

 

The High Ratio rule changes include:

-         Maximum Amortization reduced to 25 years

-         Gross Debt Service Ratio for good credit borrowers reduced to 39%

-         High Ratio mortgages capped at $1 million purchase price

-         Maximum Refinance reduced to 80% Loan to Value

 

Some of the OSFI rule changes include:

-         Reduction in Stated Income mortgage products for the self-employed

-         Elimination of cash back for down payment

-         Limiting Home Equity Credit Lines (HELOC) to 65% Loan to Value

-         Applying Qualification Rates to all mortgages (formerly just high ratio)

 

The combination of these changes will make obtaining mortgage financing more difficult for a number of Canadians.  First time home buyers will find themselves waiting a lot longer to purchase their first home.  Self-employed individuals who have worked hard and have consistent income and good credit will still have trouble borrowing because of tax write-offs afforded to them from the government themselves (quite a catch-22).  If a person has a lot of consumer debt, their ability to consolidate into a low interest, low monthly payment solution is now seriously impaired, which can lead to the very financial crisis that the government is trying to avoid.  Retirement planning is impaired as many Canadians use the “Smith Maneuver” to leverage their home equity to supplement their income in their golden years.  These changes also limit everyone’s options at mortgage renewal time, in some case putting the borrower at the mercy of whatever their current lender decides to charge them.

 

What does all this mean for you?

 

Now, more than ever, Canadians need to rely on their Mortgage Centre Comox Valley team of Mortgage Professionals to guide them through the mortgage process.  Whether purchasing, refinancing, or renewing, The Mortgage Centre Comox Valley can provide you with the advice you need to navigate your way through the maze of mortgage changes and help you find the best mortgage product to meet your unique financial needs.  The Mortgage Centre Comox Valley has access to several provincially regulated and privately owned lenders that are not affected by the new OSFI rules, providing many more options than a bank can.

 

Don’t accept the first offer your bank gives you, don’t take “no” for an answer, and don’t be afraid to think outside the box.  Call The Mortgage Centre Comox Valley today!

Courtesy of:

Angela Zumbo, BBA,AMP

Accredited Mortgage Professional

The Mortgage Centre Comox Valley

 

 


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