New Mortgage Rules
What did they really mean to you?

Now that the dust has settled from the mortgage rule changes of April 2010 - let's see what they really meant to you.  In many cases - with the guidance of your broker - the rules were not a major issue for many consumers.  Many of my clients were still able to purchase a home, rental property or refinance.

I hope this simple summary will help. Please feel free to pass it on.

IMPORTANT - the government changes effected high ratio mortgages (people borrowing with less than 20% down payment or equity).

First time home buyers were still buying with 5% down and some cash back mortgages.

Investors were still buying with 20% down payment.

If you were buying or refinancing your home with less than 20% down payment or equity in your home the new rules require you must qualify for a variable rate at the Bank of Canada benchmark rate (currently 5.19%). 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%). So for some people this was not a deal breaker.  Worst case - they did not qualify for variable and took the great low 5 year fixed rates in the mid 3% range.

If you were refinancing your home? You could 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 do you qualify?

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 70-80% 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 were 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 allocate that rental income to help you qualify for the mortgage.  In some cases it makes all the difference.

Are you self-employed?

The rules set by CMHC effected those with more than 3 years of business for self income.  However, since the rule change other insurers have made adjustments and we have more options for self-employed people.  Ask me for details.