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Government Putting The Brakes On The Real Estate Market.
As of April 17th/2010, the Federal Government implemented changes in the mortgage market that will heavily affect first time Buyers and families with one income. The reason for the change, the government is saying, is to protect Canadian Homeowners from overextending themselves when interest rates move-up.
What are the changes? Buyers will now have to qualify at a higher rate depending on the type of mortgage they are seeking. It is startling when you look at the numbers and who qualifies and who does not, when you bring any sort of debt into the picture, clients qualify for way less. This step by the government alone will cause a correction in the real estate market as supply increases and people are less qualified to purchase a home.
Conventional Mortgages Qualification: Putting Down 20% or more of the purchase price:
Any variable RATE mortgage with a 1 year, 2 year and 3 year term will be qualified on the 3 year discounted rate (currently 3.85%) a 4 year term will be qualified with the 4 year rate (currently 4.34%) a 5 year term will be qualified with the 5 year rate (currently 4.64%). For conventional mortgages it is not that bad.
High Ratio Mortgages Qualification: Putting Down less than 20% of the purchase price.
For loans with a fixed rate term of less than 5 years and for all variable rate mortgages. Regardless of term, the qualifying rate is the greater of the Benchmark rate: The Benchmark rate is currently 5.85 and is rumored to be moving to 6.10. BUYERS WILL NOW QUALIFY FOR WAY LESS LOAN AMOUNT and that is where it will hurt first time buyers and one income families.
Here is an example:
Someone SINGLE, earning $50,000 under the old rules with good credit would qualify for a $350,000 purchase, 5 % down with no debt. Under the new rules they qualify for about $280,000. (Just barely!) __________________________________________________
Buy a A Home With $0 Down: Do you know you can still Buy a Home with "No Money Down." If you have average credit and $5,000 for a Deposit, we can help you Buy a home. Contact us today for details. |
