Today is day one of the government’s new mortgage rules.

Here’s a quick video rundown on qualifying rate….

QUALIFICATION RATE

The biggest rule change affects borrowers who put down less than 20% and want a variable or 1- to 4-year fixed term.

Yesterday, you might have qualified for a high-ratio $250,000 variable-rate mortgage with a 3.8% qualifying rate.

Today, lenders will demand you qualify with a 6.10% rate.

That means your income needs to be around 25% higher today than it did yesterday to be approved for the same variable or 1- to 4-year fixed rate mortgage!

Nothing changes with 5- to 10-year mortgage terms.

The qualification rate will still be based on the rate you’re quoted.

REFINANCES

Starting today, insured refinances will be limited to 90% loan-to-value.

2ND HOMES

Second homes now qualify for high-ratio insured financing if, and only if, they have no more than one unit.

RENTAL FINANCING

People buying rental properties now have to put down 20% (instead of 5% last week) to get insured financing.

You can put down less than 20%, but you’ll generally need to use an uninsured lender, which means higher interest rates.

In short:

When a subject property or owner-occupied property generates rent:
50% of gross rent is added to the borrower’s income
Property taxes and heat are excluded from Total Debt Service (TDS) calculations.
For non-owner occupied rental properties:
100% of net rental income is added to the borrower’s gross income
The mortgage payment, property taxes, and heat are excluded from TDS calculations.

Net rental income:

A 2-year average of rents is required to establish net rental income (we’re checking on what exceptions may be permitted)
Net rental income is proven via the borrower’s T776 Statement of Real Estate Rentals OR lenders can use their own guidelines to validate rental income. Net rental income can be grossed up 15% if the borrower takes deductions for depreciation or amortization, or rental-related self-employed income.

PS  on Investment property

However, the 20-per-cent minimum down payment rule is less likely to make a significant dent in real estate activity as there are no rules as to where those funds can come from. There is nothing in the rules that would prevent homeowners from withdrawing equity from their primary residences to meet the 20 per cent threshold on a second investment property, for example.

Creative financing will become increasingly popular.

Here again, I can’t stress how important it is to get the

RIGHT ADVICE – AT THE RIGHT TIME…

Ultimately, I think home buyers will continue to tap their personal credit lines and family connections to get the money they need to enter the housing market.

Bottom line – If you’re going to invest in real estate, you’ll have to put down a minimum of 20 per cent.

You may want to contact me to discuss Email me

Mark Fidgett | 604-273-2002

“Your Personal Mortgage Consultant….For Life!”

PS – Please Don’t Keep Me a Secret
A REFERRAL is when you INTRODUCE someone you care about to someone you TRUST!

T 604.273.2002 | F 604.522.2072
W http://www.notapennydown.com

An independent Mortgage Specialist associated with the Verico Mortgage Network.

Borrowing Guidelines for Insured Stated Income Programs in Canada are about to change

The borrowing guidelines for insured Stated Income Programs are about to undergo some major changes and these changes will be implemented effective April 9, 2010.

The changes are being announced by CMHC (also known as Canada Mortgage and Housing Corporation). CMHC’s changes, as well as those announced by Finance Minister Jim Flaherty effective on April 19, 2010 are all attempts to help cool off the heated housing market which is now being driven by record-low interest rates. More importantly, these new measures are required to protect borrowers from taking on more debt than they can afford especially as interest rate hikes are imminent. While Canada still allows Stated Income programs here, they are becoming very rare in the U.S. The massive number of defaults and foreclosures reported by the U.S. after the 2008 credit crisis were attributed mostly to Stated Income programs that were used to place under-qualified borrowers into mortgage loans that they could not afford.

While Canadian lenders continue to use the Stated Income programs here, customized for commissioned and self-employed borrowers, CMHC will now be scrutinizing those same applications using tighter underwriting criteria making the CMHC Self-Employed mortgage insurance program a little harder to access.

What exactly does Stated Income mean?

Stated Income means exactly that. When a mortgage application is created, for a self-employed or commissioned applicant, and the entire income amount is not verifiable in traditional documents, for example a Notice of Assessment, the applicant may apply under the Stated Income program to allow an income adjustment to help qualify them for a home purchase or re-finance.

Most important change is Tenure: those who have been working in the same business for greater than three years, would not be eligible for the Stated Income program and therefore those in this category would have to provide proof of their income, for example, a Notice of Assessment.

I welcome your comments below : )

Mark Fidgett | 604-273-2002

“Your Personal Mortgage Consultant….For Life!”

PS – Please Don’t Keep Me a Secret
A REFERRAL is when you INTRODUCE someone you care about to someone you TRUST!

T 604.273.2002 | F 604.522.2072
W http://www.notapennydown.com

An independent Mortgage Specialist associated with the Verico Mortgage Network.

Imagine if this was you?

Don’t wait, call today and allow me to enhance your net worth “For Free”

Why wouldn’t you?

I welcome your comments below : )

Mark Fidgett | 604-273-2002

“Your Personal Mortgage Consultant….For Life!”

PS – Please Don’t Keep Me a Secret
A REFERRAL is when you INTRODUCE someone you care about to someone you TRUST!

T 604.273.2002 | F 604.522.2072
W http://www.notapennydown.com

An independent Mortgage Specialist associated with the Verico Mortgage Network.

There are really only two things to note if you wish to buy here as a foreigner: In Canada you must pay 25% of your rental income to Revenue Canada and when you sell you need to pay 25% of any capital gain. Whoa – “Ouch” you say. Not to worry – it is 25 per cent of the NET rent and the NET capital gain – as long as you file the appropriate forms and have a Canadian agent, otherwise taxes will be collected on the gross rent and/or the sale price.

To do:

1. Once you buy the property, immediately file a form called the NR6 in advance of the first day of rental income. Attach a pro forma rental statement, for example: “I expect $2,000 a month, my expenses are $1,900. My net rental income is expected to be only $100.” Then you only need to pay $25 per month to the (less) happy taxman. You have to file that form every December.
2. You need a tax agent in Canada who represents you – could be a realtor, property manager or tax accountant. Your agent must file form NR4 with Revenue Canada before March 31 to state how much rent actually was collected.
3. He or she must file a tax return on your behalf every year by June 30.
4. When you sell with a profit you file form T2062 (say you paid $800,000 and sold for a million – of the $200,000 profit the taxman will grab happily $50,000).
5. If you made your euros growing the “wacky tobaccy” and you wish to pay cash, your rental agent, by law is required to report your cash down payment ($10,000 plus).

That’s it. But please note: Just because it is easy, legal and safe to own property in canada, it does not mean that all property is a good investment – just as in the place you come from. There are good and bad deals, good and bad agents and it is up to you to do some research, find an experienced agent, and if what you are buying sounds too good to be true – it is.

Need help? Contact me at 604-273-2002 or www.NotaPennyDown.com

Mark Fidgett | 604-273-2002

“Your Personal Mortgage Consultant….For Life!”

PS – Please Don’t Keep Me a Secret
A REFERRAL is when you INTRODUCE someone you care about to someone you TRUST!

T 604.273.2002 | F 604.522.2072
W http://www.notapennydown.com

An independent Mortgage Specialist associated with the Verico Mortgage Network.

What most DON’T know about High Ratio Insurance

Vancouver Mortgage Broker Mark Fidgett explains High Ratio Mortgages

Banks and financial institutions are not allowed to lend against real estate mortgages unless the down payment is at least 20% of the value of the property.  In order to achieve a higher level of financing, lenders need to obtain mortgage default insurance from one of three institutions in Canada – the Canadian Mortgage and Housing Corporation (CMHC),  Genworth Financial (formerly GE Mortgage) and AIG United Guaranty.   In the event the borrower is unable to pay the mortgage, the lender will be paid by these institutions.

AIG is not widely used due to the financial difficulties experienced by their parent company in the US.

It is the lender’s choice as to which mortgage insurance company to use.   Many lenders have a preference as to which mortgage insurance company to use.

There may be cases where one mortgage insurance company is more suited to the transaction.  For example, Genworth has a more flexible policies for rental suites. Genworth will accept non-conforming basement suites while CMHC will not.

The insurance premiums is computed based on the level of financing, as shown below

Note: premiums are for fixed rate or capped variable single advance mortgages.  Please contact www.notapennydown.com for other types of mortgages..

The cost of mortgage default insurance is paid by the borrower and can be added on to the mortgage amount.    Note that with high-ratio mortgages, CMHC,  Genworth or AIG will do the appraisal so there is no appraisal fees in a high-ratio transaction.

Mark Fidgett | 604-273-2002

“Your Personal Mortgage Consultant….For Life!”

PS – Please Don’t Keep Me a Secret
A REFERRAL is when you INTRODUCE someone you care about to someone you TRUST!

T 604.273.2002 | F 604.522.2072
W http://www.notapennydown.com

An independent Mortgage Specialist associated with the Verico Mortgage Network.