New Mortgage Rules
What do they really mean to you?
If you are confused by the recent changes set by the Department of Finance - you are not alone. I believe you should have the straight goods and then you can decide what is best for you. I hope this simple summary will help. Please feel free to pass it on.
IMPORTANT - the government changes effect high ratio mortgages (less than 20% down payment).
Are you buying a home? You can still buy with 5% down.
Are you buying a rental? You need 20% down payment.
Do you want a variable rate? If you are buying or refinancing your home with less than 20% down payment or equity in your home you must qualify for a variable rate at the Bank of Canada benchmark rate (currently 5.85%). If you are buying or refinancing with 20% or more down or equity in your home you can qualify at the 3 year rate(currently 3.69-3.95%).
Do you want a fixed rate for 1,2,3 or 4 years? If you are buying or refinancing your home with less than 20% down payment or equity in your home you must qualify for terms less than 5 years at the Bank of Canada benchmark rate (currently 5.85%). If you are buying or refinancing with 20% or more down or equity in your own home or a rental you can qualify at the 3 year rate(currently 3.69-3.95%) for 1,2 and 3 year terms or the 4 year rate for that term.
Do you want a fixed rate for 5 years? If you are buying or refinancing your home with any size down payment or equity in your home you can qualify at the contract/discounted rate for 5 year term. Currently in the low 4% range.
Are you refinancing your home? You can now refinance your home to 90% of the appraised value? If you are self employed that limit is 85%.
If you are purchasing a rental property with 20% or more down how much of the rent can you offset against the mortgage payment?
It depends on the lender and how many rental properties you own. As an example, if you own a rental property and purchasing a new home to live in, you can still offset 70% of the rental income -whether you have 20% down on the new home or not. Example - if you collect $1000 in rent and pay $1000 in mortgage payments you can offset $700 per month of the rent for a net of $300 per month as monthly debt on the rental). Some lenders have different guidelines and will consider if you have other assets, good credit and net worth. Your broker can help you package the deal with the right lender.
If you are are buying a home with a basement suite can you include the rental income?
Regardless if you are buying with 20% down or less, you can add 50%-100% of the rental income to your personal incomefor qualifying. This is a different calculation than offset. Ask me for more details if this applies to you.
Are you self-employed?
If you have been in business for over 3 yearsyou must use your gross income as on your tax return to qualify. If you have been in business for less than 3 years you may "state reasonable income" to qualify. Limit of 90% loan to value on a purchase (you need 10% down) or 85% on a refinance (15% equity in home). If you are buying a rental we do have lenders that will allow you to state your income - ask me for more details if this applies to you.
|
