New Mortgage Rules: Amortization reduced

[ashedfc]

There's another way (if you are a fist time home buyer): take a 5% property value as RRSP loan with a repayment deferral of 180days; then deposit the proceeds into an RRSP; after 90days withdraw from the RRSP as HBP withdrawal; Put this money towards your downpayment; now you have your 0% down mortgage..
The RRSP will give you some tax refund; use the refund to pay down the RRSP loan, & paydown the remaining RRSP loan over a period of time..

This strategy is a lot better than going to high risk lenders & paying a higher interest rate on your mortgage; or taking a second mortgage at a very high interest rate..

[ZombieMakeup]

Zero down mortgages did exist after 08. My question is after July 9 can you still get them? I know they are stopping cash back mortgages but what about other zero down mortgages? While I do appreciate all your opinions, I wanted facts. Sometimes a zero down mortgage is better for some people.

no, not after july 9th, not with any decent bank....

[MortgageQueen]

Hi all,

Sorry I was away or I would have posted info on this. Jayne, you will most likely Not be able to get 100 percent financing. The only people that would get that would be ones that could provide other security(such as another home)
Here is a mail-out i sent to my customer/realtor base today:


Three months ago, Finance Minister Jim Flaherty told banks to tighten lending on their own. Now he’s doing it for them.
The DoF's solutions to this problem will influence our market for years to come. Below are 20 musings on the new mortgage rules, sprinkled with a few tips and predictions:

1. Hurried Implementation:

The government knew full well that borrowers would try to front-run these restrictions. So it provided ONLY 18 DAYS lead time until the changes take effect. Most lending execs had no idea that new mortgage insurance rules were imminent. As a result, lenders were not fully prepared.
Because of this, and because banks like to appear prudent to regulators, there's a chance some lenders may implement rules (like the 25-year amortization restriction) before the July 9, 2012 deadline.

2. The Stampede:

Seemingly every mortgage adviser in the country is blasting out emails advising clients about these changes. The sense of urgency will spike mortgage volumes near-term. But high-ratio borrowers who rush to get a 30-year amortization or 85% Loan to Value(LTV) refi should be warned:
Underwriting may be especially vigilent and possibly lengthier delays will occur.


3. Side-Effects:

Shorter amortizations, higher qualification rates and lower debt ratio limits will restrict buying power. These actions may trigger a bigger or longer-than-normal selloff period.

4. The Amortization Effect:

Reducing amortizations to 25 years from 30 chops the maximum theoretical mortgage by roughly 9% (versus ~7% when amortizations dropped from 35 to 30 years). That’s equivalent to paying almost 1% more on your mortgage rate.
Put another way, a qualified family earning $75,000, with no debt, will qualify for $49,000 less mortgage by being forced to take a 25-year amortization.
According to CAAMP,40% of new mortgages last year had amortizations over 25 years. Of all the new rules, this will have “the most direct impact on the Canadian housing market,” states RBC. It “will raise the barrier to entry into Canada’s housing market.” (That is Flaherty's point, of course.)
Robert Kavcic of BMO Nesbitt Burns notes: “After the 35-year amortization was eliminated last March…existing home sales fell by more than 3 per cent over the subsequent two months.”

5. Exceptions:

If you need a mortgage and have less than 20% equity, then as long as you apply before July 9, you will qualify under the old rules.
That’s true even if your purchase offer isn't final. “…The new parameters will not apply, even if the conditions of [a purchase] agreement have not been waived,” says the DoF.
If your application does not conform to the new insured mortgage guidelines, however, you’ll have to close by December 31, 2012. (See: these rule FAQs.)
Note: If your income situation, debt ratios or loan amount change, and you need to modify your mortgage after July 9, you may be bound by the new rules (even if you were already approved under the old rules).



Just to clarify a fewpoints for you in regards to the new mortgage rules :
- If you "need" a 30 year amortization (toqualify for mortgage or just need lower payments)
- If you have anyonelooking to buy a $1,000,000 property or over, and you have LESS than a 20percent down-payment
- If you are someonethat wants a Home equity Line of credit mortgage as opposed to conventionalmortgage
- If you have anyonewith LESS than 5 percent down-payment
- If you have anyonewith high debt ratios (you probably wouldn't know that, but just in case youdo. . .)
Get the application in NOW. The deadline is July 9th butLenders are already getting back-logged due to people rushing to take advantageof the old rules. In some cases, itcould actually take until July 9th to get approved. If people wait til a fewdays or even the week before, chances are very high, they won't get approval intime.
Also of note, is that approvals can be obtained under the"old rules" for closings AFTER July 9th. . .as long as the application has been “approved” BEFORE July9th and the amount remains the same.



If you require clarification, have questions, or need tofast track an application, don’t hesitate to call me.

[jayne_a]

I was actually able to talk to someone at my bank today, and I was told that since Dh and I both have amazing credit, and almost no debt, that we can get a zero down mortgage, and after July 9. I deal with scotiabank, and was also told that just b/c i want a zero down does not mean the interest will double. My interest on a zero down will be 1% higher.

[MortgageQueen]

I was actually able to talk to someone at my bank today, and I was told that since Dh and I both have amazing credit, and almost no debt, that we can get a zero down mortgage, and after July 9. I deal with scotiabank, and was also told that just b/c i want a zero down does not mean the interest will double. My interest on a zero down will be 1% higher.

Jayne: Take it and Run! They're basically breaking their own rules, but that's awesome! All I can say is get a commitment from them in writing!! I see banks back out of "their promises" every single week. . . . sometimes the day of, or day before closing. Make sure your deal is 100% solid and confirmed before you release any conditions on your offer to buy.

[ashedfc]

Yes, One of my well known person had a similar problem.
His bank backed away from funding his mortgage on the day of closing.

[EricsMom]

I live in the surrounding area outside of Greater Vancouver. These mortgage rules make it near impossible for average families to purchase real estate. Three bedroom townhomes sell for an average price of $340,000 (give or take $40,000 either way depending on if they are 20 years old or brand new with smokin' ammenities). You can not buy a house here for under $400,000 ... the run down homes in really bad neighbourhoods start around $380,000 - $400,000. $450,000 to $500,000 is average for much older homes with new homes starting at $550,000 and up.

If you are an average family earning $60K to $70K it is impossible to afford a house here and with the new mortgage rules and impending increasing interests rates it's going to be almost impossible to afford a mortgage on a townhouse as well.

The housing market here has been outrageous. 12 years ago we looked at buying a 3 bedroom house in a new development. We decided against it because it was I wanted to pay down debt. Those brand new houses were selling for $209,000. 12 years later they are selling for almost $600,000. We struggled to get in the market 2 years ago and there have been several major changes to mortgages since then. If we were to try now, there would be no way we could afford the mortgage ... and yes, we put 5% down.

There is no real point to my post, just a rant really about the completely unaffordable market we live in and how impossible it is to "get in" for average families . . .

[ashedfc]

There is no real point to my post, just a rant really about the completely unaffordable market we live in and how impossible it is to "get in" for average families . . .

We are in a similar situation where California/Arizona/etc.. were in 2007.
when it becomes completely unaffordable, that's the beginning of a correction..
only 2 things can happen
(a) either income goes up, or
(b) house value goes down..
Looking at the economic situation, we don't foresee income going up (specially when companies are firing employees left & right)
so, we are only left with the 2nd option... where prices has to some down.. Now will they come down today, couple of months, its anyone's guess.. but it will happen for sure.

[jayne_a]

I live in the surrounding area outside of Greater Vancouver. These mortgage rules make it near impossible for average families to purchase real estate. Three bedroom townhomes sell for an average price of $340,000 (give or take $40,000 either way depending on if they are 20 years old or brand new with smokin' ammenities). You can not buy a house here for under $400,000 ... the run down homes in really bad neighbourhoods start around $380,000 - $400,000. $450,000 to $500,000 is average for much older homes with new homes starting at $550,000 and up.

If you are an average family earning $60K to $70K it is impossible to afford a house here and with the new mortgage rules and impending increasing interests rates it's going to be almost impossible to afford a mortgage on a townhouse as well.

The housing market here has been outrageous. 12 years ago we looked at buying a 3 bedroom house in a new development. We decided against it because it was I wanted to pay down debt. Those brand new houses were selling for $209,000. 12 years later they are selling for almost $600,000. We struggled to get in the market 2 years ago and there have been several major changes to mortgages since then. If we were to try now, there would be no way we could afford the mortgage ... and yes, we put 5% down.

There is no real point to my post, just a rant really about the completely unaffordable market we live in and how impossible it is to "get in" for average families . . .

I hear ya. Homes where i live are expensive too. The average home here is about $300,000. Last year we made $50K we are trying to get a home on that and it's hard. Our realitor said since Friday, they have lost 4 sales, b/c of the new changes. And that's with a small company too. I can only imagine how many sales were lost with the 2 big real estate agencies in town. We don't have rent control here, and it sucks. My SIL in BC pays only $150 more in rent than i do. And her place is bigger. NOT FAIR. These changes are affecting so many ppl. I know rent here is just gonna go up.

[themortgageguy]

Jayne,

The cash back mortgage elimination has nothing to do with the announcements made by Flaherty for insured mortgages and the July 9th deadline. It looks like they will be eliminated, but what is driving it is the residential lending guidelines issued by the Superintendent of financial institutions (a federal agency that regulates banks for the most part). Their guidelines stated that:

"Incentive and rebate payments (i.e. "cash back") should not be considered part of the down payment."

So it effects insured and uninsured mortgages because it is issued to all federally regulated lenders. The guidelines come into effect on October 31, 2012. How these guidelines will actually be implemented remains to be seen. The major lenders have not commented on them yet. However since cash back mortgages are by default insured, its odd that the new rules from Flaherty makes no mention of them and leaves some confusion.

I'd recommend you get that cash back mortgage ASAP. Even though the insured mortgage rules come into effect on July 9th and the guidelines October 31, 2012, it won't make a bit of difference to you if you for some reason can't get mortgage insurance even though the new rules make no mention of it. And don't forget that you may be qualifying using a less generous GDS as well.

You should also realize that 1% higher than posted for a cash back is high. There are other lenders that I deal with that offer these at much better than bank rates. Generally a much better deal.

Also you need to look into these types of mortgages in detail. They can be very restrictive and you need to know what the terms of them are.

If you're interested in a summary of the rules here's a link.

Rob

[brunt]

Just to clarify a fewpoints for you in regards to the new mortgage rules :
- If you "need" a 30 year amortization (toqualify for mortgage or just need lower payments)
- If you have anyonelooking to buy a $1,000,000 property or over, and you have LESS than a 20percent down-payment
- If you are someonethat wants a Home equity Line of credit mortgage as opposed to conventionalmortgage
- If you have anyonewith LESS than 5 percent down-payment
- If you have anyonewith high debt ratios (you probably wouldn't know that, but just in case youdo. . .)
Get the application in NOW. The deadline is July 9th butLenders are already getting back-logged due to people rushing to take advantageof the old rules. In some cases, itcould actually take until July 9th to get approved. If people wait til a fewdays or even the week before, chances are very high, they won't get approval intime.

On the other hand, I (as an admittedly conservative individual) would suggest that anyone in any of those positions should not be in that house. If a person "needs" any of these things, then they cannot afford that house.

Good thing that I am not in power in politics. I don't believe that taxpayers should be insuring any mortgages.

[Brad]

I agree.

[newbiesaver]

On the other hand, I (as an admittedly conservative individual) would suggest that anyone in any of those positions should not be in that house. If a person "needs" any of these things, then they cannot afford that house.

And there in lies the problem. I'm no expert but it seems that if only those who can afford the most traditional of mortgages purchased homes (at the way the prices are in some of the bigger Canadian cities these days) you would see increased disparity between low-mid and high income people.

The average person/family wouldn't be able to afford purchasing a home so they rent....but who are they renting from? Those that CAN afford to purchase additional properties and the more renters there are, the more investors gain and the more they gain? The more they can outbid those trying to get out of renting. I think it just becomes an uphill battle where the richer person wins again and again.

This may not be the case all across Canada but certainly in places like Toronto and Vancouver/

I have to emphasize that I'm not saying people should take on more debt than they can pay BACK but I think 5% down, mortgage insurance, alternative lending, etc. can equalize the playing field somewhat.

Personally, and again I'm no expert, it seems that there needs to even heavier regulation on investment property, foreign purchases, bidding wars, etc. - not to make it impossible but to make it just that little bit more difficult so as to allow primary residence and/or first time home buyers a chance to play, too.

[themortgageguy]

And there in lies the problem. I'm no expert but it seems that if only those who can afford the most traditional of mortgages purchased homes (at the way the prices are in some of the bigger Canadian cities these days) you would see increased disparity between low-mid and high income people.

The average person/family wouldn't be able to afford purchasing a home so they rent....but who are they renting from? Those that CAN afford to purchase additional properties and the more renters there are, the more investors gain and the more they gain? The more they can outbid those trying to get out of renting. I think it just becomes an uphill battle where the richer person wins again and again.

This may not be the case all across Canada but certainly in places like Toronto and Vancouver/

I have to emphasize that I'm not saying people should take on more debt than they can pay BACK but I think 5% down, mortgage insurance, alternative lending, etc. can equalize the playing field somewhat.

Personally, and again I'm no expert, it seems that there needs to even heavier regulation on investment property, foreign purchases, bidding wars, etc. - not to make it impossible but to make it just that little bit more difficult so as to allow primary residence and/or first time home buyers a chance to play, too.

Newbie you hit the nail on the head.

1) Mortgage arrears in Canada are incredibly low
2) The whole intent of CMHC was to allow the average Joe to buy a house. Without it there would be a lot more renters out there.
3) residential construction has a significant impact on the economy. there is concern that the new rules have gone to far and will slow economic growth
4) How many people do you know that see their home as a retirement nest egg? Most. Renters are not able to benefit from the appreciation in house prices. Sure you live there but it is an investment as well.

I also agree that there needs to be more regulation on certain types of buyers as well. The elimination of insurance on homes $1M and up was a start. Not everyone should own a home but there are plenty of people out there that can responsibly do so with mortgage insurance.

[ashedfc]

Realtor warns clients: "It's time to Cash Out!"


The Realtor says "I’m a REALTOR and I sold my own home 4 weeks ago. It wasn’t too big or too small. It’s only 6 years old and still feels new. I sold because in 6 months my home will be worth less than it is today. I think its time to cash out! "

http://whispersfromtheedgeoftherainf...r-realtor.html