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Thread: Breaking: Effective Oct 17 - Qualifying for Mortgages Changing

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    Default Breaking: Effective Oct 17 - Qualifying for Mortgages Changing

    BREAKING: Effective Oct. 17, borrowers getting insured 5yr fixed mtg must prove they can afford payments at the BoC posted rate—4.64% today.

    Example: Someone who qualifies for a maximum $300,000 purchase today... after Oct 17 they will qualify for approx. $240,000 maximum purchase.

    More details to be posted tomorrow. Call 403-648-1541 or email [email protected]

    UPDATE Oct 5 - More to follow but thought I would get this out for the time being. -----

    On Monday October 4th, Canada's Federal Finance Minister Bill Morneau has blind sided not only the Real Estate, Mortgage Industry and consumers... it appears that other stakeholders were surprised at the announcement too (insurers and lenders were not consulted and unaware of the impending change).

    The Department of Finance (DoF) was looking to slow down the housing market and they may have just done it with these changes, in a big way. The rules will hit the mortgage market hard, but consumers will take the brunt of it. The two big changes are:

    1) Effective Oct. 17, the qualification rate (currently today at 4.64%) will now apply to all insured mortgages (regardless of LTV, which is not the case today).

    2) Regulators are banning a wide array of mortgages from being insured, effective Nov. 30 (see below).

    In Calgary, Edmonton and pretty much most of Alberta, the timing of this announcement could not have come at a worse time. It's like getting kicked in the teeth while you were already down. This change will make homeownership less attainable for the marginal borrower, which is often younger Canadian first-time home buyers.

    Consumer Choice

    These changes are also going to take away choice for consumers as the majority of lenders that compete with the banks are now going to have a tough time with the following due to the changes for mortgages with more than 20% down payment or equity:
    - Refinances
    - Large Mortgages on Purchases over $1M
    - Rental / Investment Properties

    Effective Nov 30 the above changes will occur. Most people do not realize that many lenders (including banks) obtain bulk or portfolio insurance from CMHC, Genworth and Canada Guaranty on mortgage when more than 20% is applied. To understand or read more, click on read Changes to Low-Ratio Mortgage Insurance Eligibility Requirements

    They are forcing all insured borrowers to qualify based on the posted rate of 4.64% instead of the actual negotiated rate, the changes are the equivalent of a jump of 2% in mortgage rates (Mind you, a 200+ bps hike in the next five years would probably cause a recession, so it’s unlikely at best.). Time will tell how many people will be forced out of the market but it is suspected that it could be 15 to 20% (mostly first time home buyers).

    It is still too early to determine the full nuts and bolts of the changes as the lenders and insurers are still reviewing the changes and will likely be planning a meeting with Department of Finance (DoF) to raise concerns and clarification on the rules. This could spell trouble for consumer choice and competition for mortgage products, rates and overall solutions.

    There are a few more other changes that I will post as the week goes on but wanted to start with the most impactful items. If you have questions, please reach out, we would love to assist.
    Last edited by TimLacroix; 10-05-2016 at 09:44 AM.
    Thanks,
    Tim Lacroix | 403-648-1541
    Mortgage. Made Easy Experts
    Mortgage Connection
    www.TimLacroix.com

    If you have any questions please feel free to PM me or email [email protected]

    Click here to View current Mortgage Rates

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    Oh boy.

    This should seriously halt the 400-600 range.
    "The most merciful thing in the world, I think, is the inability of the human mind to correlate all its contents... some day the piecing together of dissociated knowledge will open up such terrifying vistas of reality, and of our frightful position therein, that we shall either go mad from the revelation or flee from the light into the peace and safety of a new Dark Age."

    -H.P. Lovecraft

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    .
    Last edited by kaput; 03-12-2019 at 12:34 AM.

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    Primary is still tax exempt... the reporting is for tracking foreign investor loophole users

    Besides the new qualifying rate there is also a drop in house related income from 44% to 39%

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    Originally posted by kaput
    Don't forget to explain the new principle residence tax reporting requirements too. That has the potential to screw a lot of people depending on how hard of a stance CRA takes. It will be very interesting to see the details behind how they are going to treat secondary suites.
    Yes there are some changes to the exemption from capital gains taxation (“the principal residence exemption”). More to follow once I have had time to review and decipher full impact.

    I was traveling and need to get my head wrapped around this too.
    Thanks,
    Tim Lacroix | 403-648-1541
    Mortgage. Made Easy Experts
    Mortgage Connection
    www.TimLacroix.com

    If you have any questions please feel free to PM me or email [email protected]

    Click here to View current Mortgage Rates

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    This doesn't cover people who have already applied and have written letters from their bank saying they've qualified right? My closing date is Oct 28 and I'm slightly worried but not really since we can just add my wife's income onto the mortgage. ..

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    Originally posted by ercchry
    Primary is still tax exempt... the reporting is for tracking foreign investor loophole users

    Besides the new qualifying rate there is also a drop in house related income from 44% to 39%
    The qualifying ratios do not appear to be changing and remain at a maximum of 39% GDS and 44% TDS. GDS of 39% has been the maximum for a few years.

    Gross Debt Service (GDS) ratio—the carrying costs of the home, including the mortgage payment and taxes and heating costs, relative to the homebuyer’s income;

    Total Debt Service (TDS) ratio—the carrying costs of the home and all other debt payments relative to the homebuyer’s income.
    Thanks,
    Tim Lacroix | 403-648-1541
    Mortgage. Made Easy Experts
    Mortgage Connection
    www.TimLacroix.com

    If you have any questions please feel free to PM me or email [email protected]

    Click here to View current Mortgage Rates

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    Yeah I read that wrong, looks to be unchanged

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    Originally posted by JohnnyHockey
    This doesn't cover people who have already applied and have written letters from their bank saying they've qualified right? My closing date is Oct 28 and I'm slightly worried but not really since we can just add my wife's income onto the mortgage. ..
    No you are not affected... If you have a LIVE purchase and approved with your lender, you are good.

    Caution, do not make any changes to your purchase price or mortgage after Oct 17 as you may be subject to the new rules.

    NOTE: Pre-qualifications / pre-approvals are not valid approvals to avoid the new rules. You must have a property (LIVE) and submission prior to Oct 17th.
    Thanks,
    Tim Lacroix | 403-648-1541
    Mortgage. Made Easy Experts
    Mortgage Connection
    www.TimLacroix.com

    If you have any questions please feel free to PM me or email [email protected]

    Click here to View current Mortgage Rates

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    Awesome thanks for the quick response!

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    Originally posted by ercchry
    Yeah I read that wrong, looks to be unchanged
    No prob.. thanks for bringing it up as it is good to know.
    Thanks,
    Tim Lacroix | 403-648-1541
    Mortgage. Made Easy Experts
    Mortgage Connection
    www.TimLacroix.com

    If you have any questions please feel free to PM me or email [email protected]

    Click here to View current Mortgage Rates

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    .
    Last edited by kaput; 03-12-2019 at 12:34 AM.

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    IMO the way it should always have been. Seems to only apply for homes purchased with less than 20% down. A step in the right direction.
    Last edited by -relk-; 10-04-2016 at 12:55 PM.

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    Originally posted by -relk-
    IMO the way it should always have been. Seems to only apply for homes purchased with less than 20% down. A step in the right direction imo.
    Yes some measures needed to have been done however, it is also a little extreme at this point for some areas. More time to adapt would be nice as this will affect the First Time Home Buyers the most.

    The changes affect all mortgage transactions: purchases, refinances and renewals and is regardless of down payment / equity size.
    Last edited by TimLacroix; 10-04-2016 at 09:24 AM.
    Thanks,
    Tim Lacroix | 403-648-1541
    Mortgage. Made Easy Experts
    Mortgage Connection
    www.TimLacroix.com

    If you have any questions please feel free to PM me or email [email protected]

    Click here to View current Mortgage Rates

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    Well I have to decipher some of this stuff but it sounds like it may change some of my plans for selling/upgrading/purchasing another rental in the future.

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    Originally posted by TimLacroix


    Yes some measures needed to have been done however, it is also a little extreme at this point for some areas. More time to adapt would be nice as this will affect the First Time Home Buyers the most.

    The changes affect all mortgage transactions: purchases, refinances and renewals and is regardless of down payment / equity size.
    CORRECTION

    The qualifying rate is essentially affecting all INSURED mortgages.

    On Nov 30, 2016 - this rule will also apply to Mortgages with more than 20% down payment whereby the lenders bulk insure mortgage regardless of LTV (loan to value).

    There are two types of low-ratio mortgage insurance:

    1- transactional insurance on individual mortgages at the point of origination, typically paid for by the borrower, and

    2- portfolio (bulk pooled) insurance that is acquired after origination and typically paid for by the lender. The majority of low-ratio mortgage insurance is portfolio insurance.

    More details coming folks...
    Thanks,
    Tim Lacroix | 403-648-1541
    Mortgage. Made Easy Experts
    Mortgage Connection
    www.TimLacroix.com

    If you have any questions please feel free to PM me or email [email protected]

    Click here to View current Mortgage Rates

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    Originally posted by TimLacroix


    Yes some measures needed to have been done however, it is also a little extreme at this point for some areas. More time to adapt would be nice as this will affect the First Time Home Buyers the most.

    The changes affect all mortgage transactions: purchases, refinances and renewals and is regardless of down payment / equity size.
    Agreed. The last couple of changes to how real estate is purchased have come on with very little warning. Not very fair to people who are undergoing purchases around the time they are implemented.

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    Does this really affect renewals? That seems fucked up "sorry sir, you have been carrying this mortgage just fine for the past 5 years but now you need a cosigner or we will be forcing you to sell your family home and pull your kids out of school and move somewhere else"

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    Originally posted by ercchry
    Does this really affect renewals? That seems fucked up "sorry sir, you have been carrying this mortgage just fine for the past 5 years but now you need a cosigner or we will be forcing you to sell your family home and pull your kids out of school and move somewhere else"
    Let me clarify...

    It will not affect renewals if you are staying with the existing lender and they offer a renewal. You do not need to qualify to renew.

    However, you will need to qualify to switch lenders at renewal time. The impact of this is less choice at renewal if you do not qualify but always have the option of renewing with your existing lender.

    This qualifying should not impact the majority if they are considering switching lenders.

    If your LTV is less than 80% and not insured, you will likely still have more choice at the renewal time too. If you have questions, please give us a call and we can let you know your options.

    NOTE: Details are still coming in and we will keep everyone updated as required.
    Thanks,
    Tim Lacroix | 403-648-1541
    Mortgage. Made Easy Experts
    Mortgage Connection
    www.TimLacroix.com

    If you have any questions please feel free to PM me or email [email protected]

    Click here to View current Mortgage Rates

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    I am with several people here that I agree with closing the loophole for foreign buyers. And the higher qualification rules should be fine and only affect those trying to borrow the absolute maximums which isn't really wise in the first place.


    However this is what I am worried about:
    Originally posted by kaput

    I'm sure the CRA will find all kinds of other uses for this information that nobody has thought of yet.
    First step to start taxing net worth IMO

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