Christine Buemann Mortgage Broker

Please note that the Bank of Canada has increased their Qualifying Rate to 4.84%, effective immediately (from 4.64%). The increase results in an additional $11.25 a month of qualifying mortgage payment, for every $100k . A $300k mortgage would require an additional $33.75 in higher mortgage payment to qualify (not the actual mortgage payment, simply the payment used for qualification). That is equivalent to roughly $1125 in credit card debt reduction or $1k more required in annual income. What is the Qualifying Rate? This is the rate set by the Bank of Canada that all lenders must use as the "stress test" for all insured mortgages. It is not the rate that your clients will be paying, simply the rate that the Bank of Canada has set to ensure they are able to afford their mortgage payment, should the rates increase. Please note that pre-approvals are now subject to change along with the new rate however deals that have already been sent in and approved by CMHC shou...

As I have mentioned several times in my previous postings, every lender has a different set of terms for their mortgages but they also each have unique qualifying criteria. Here are several guidelines that may vary by lender: ·          Some will use 3% of the balance for all revolving credit (i.e. lines of credit, credit cards) while others will use the minimum payment that is reported on your credit report to debt service ·          Some will only allow you to add 50% of the rental income from existing rentals back to your annual income. This means that all other liabilities (mortgage, property tax, heat ext.) will be included in your debt ratio. Others will use a rental offset which allows you to deduct the liabilities from your monthly income and add the balance to the application ·          Some lenders will only lend on the value of the house plus ...

As you may have heard, last week there were some changes announced in the Canadian mortgage industry for insured mortgages. The Office of Superintendent of Financial Institutions (OSFI) also released its final Underwriting Guidelines as a result of the B20 Discussion Paper on the same day and they seem to have been overshadowed by the new guidelines. These changes will affect federally regulated financial institutions and how they qualify their clients for mortgages. Here are a few highlights of the changes that will happen in combination with the heavily publicized Bank of Canada changes. • Maximum Loan to Value for Home Equity Lines of Credit will be reduced from 80% to 65%. They will continue to not have a set time amortization, however lenders are must now expect the borrowers to have the ability to repay over time • The qualifying rate will now have to be used to qualify for all conventional mortgages. It is already being used to qualify variable rates and fixed term...

The Bank of Canada announced new changes to come to Canadian mortgage guidelines this morning. This is the fourth tightening of guidelines in the past 4 years. They have clearly stated that the intention of their continual clamping down of qualifying criteria is an attempt to cool down the housing market and reduce household debt in Canada. I was pleased to hear that the 5% down payment rule would remain; however it is yet to be determined how these new rules will affect home owners. They will take effect on July 9th and I believe that they have implemented such a short time frame in order to eliminate the surge of people rushing into home purchases that was experienced with the last announcement of changes. Here are the new changes: • Maximum amortizations will be reduced from 30 years to 25 years • Maximum refinances will be reduced from 85% to 80% • Maximum GDS and TDS are set at 39% and 44% • Properties purchased at over $1 million will no longer be eligible for mortgage ins...

If you are putting less than 20% down then your mortgage will be insured through CMHC, Genworth or Canada Guaranty. They all have a strict set of qualifying guidelines and most lenders follow these guidelines for borrowers with more than 20% down as well. There are 2 different ratios that they consider along with your credit score. The first is the Gross Debt Servicing Ratio (GDS). You can figure this out by breaking down your gross annual income to monthly. Only 35% of your income can be used towards your mortgage payment, monthly property taxes and heat (they usually use $100 for heat). The second is the Total Debt Servicing Ratio (TDS). For this calculation, they also use your gross income and new mortgage payment, property taxes and heat but this time they factor in all of your other debts including credit cards, loans, child support ext. Generally no more than 42% of your income can be used towards all of your debts combined. For those who have exceptional credit (680 or hi...