Page 28 - Best Magazine Summer Edition 2017

ECONOMY AND FINANCE
Have you noticed any changes in the qualification when you are planning
to buy and/or refinance your property?
Let me tell you why.
ECONOMÍA Y FINANZAS
The government has changed mortgage requirements several times over the last few years which affects how borrowers qualify for government-backed insured mortgages. Banks and financial institutions in Canada continue to offer very competitive mortgage products and services to millions of Canadians.
Changing regulations in Canada’s mortgage market
• Increasing Insurance premiums (the amount a borrower must pay) for mortgage default insurance.
• Reducing the maximum amortization period for insured mortgages from 40 years to 25 years.
• Requiring banks to qualify all borrowers applying for an insured mortgage at the Bank of Canada’s conventional
• five-year fixed posted mortgage rate of 4.64%, an interest rate that is typically higher than what they will actually be paying.
• Limiting the maximum gross debt service (GDS) ratio to 39 per cent and the maximum total debt service (TDS) ratio to 44 per cent.
These two important ratios are used when calculating a person’s ability to pay down debt. GDS is the share of a borrower’s gross household income needed to pay for home-related expenses, such as mortgage payments, property taxes and heating expenses. TDS is the share of a borrower’s gross income needed to pay for all debts, including those relating to home ownership.
• Requiringadownpaymentofatleast five per cent of the home purchase price. A further 10 per cent must be added to the down payment for the portion of the house price between $500,000 and $999,999. For non-owner occupied properties, a minimum down payment of at least 20 per cent is mandatory.
• Making government-backed mortgage insurance available only for homes with a purchase price of less than $1 million. Borrowers buying homes at or above this amount will need a down payment of at least 20 per cent if their mortgage is from a federally-regulated financial institution such as a bank.
• Limiting borrowing to a maximum of 80 per cent of the value of their homes when refinancing, a drop from 95 per cent.
• Withdrawing mortgage insurance on home equity lines of credit (HELOCs).
• Instituting a 20 per cent minimum down payment for non-owner occupied properties. ( investment properties)
What do these changes mean for consumers?
Because of these changes , households may alter their decision making when borrowing to purchase/ refinance a house. Before your next move always contact your Mortgage Broker for assistance with all details and avoid surprises!
Article source: Canadian Banker Association.
28 THE BEST MAGAZINE WINTER 2016 - 2017
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