First time home buyers are fucked: CMHC tightening rules

[tirebob]

This quote is hidden because you are ignoring this member. Show Quote

The housing market is permanently distorted by government policy. There's entire departments in Ottawa dedicated to distorting the housing market.

I seriously think liberals will roll out some "affordability" campaign this calendar year.

Or they are intentionally making the youth of today entirely dependant on the government tit scaring them away from conservative fiscal politics further securing their stranglehold on power... Maybe that is one in the same. I fucking hate the world right now...

[MalibuStacy]

This quote is hidden because you are ignoring this member. Show Quote

They should just change it to you need 20% down minimum to buy a house. You can’t buy with less than that. I think that would cool the house pricing everywhere except Toronto and Vancouver where people are just buying outright. Prices will never go down atleast in Vancouver where the coastal pricing is in such high demand.

This was the point of these rules but it hasn't really worked. Most younger buyer are unable or unwilling to put 20% down and are willing to do a cmhc insured mortgage.

[2Legit2Quit]

A couple years back the PEI gov rolled out a program for first time home buyers, they essentially loan you the 5% down payment.

https://www.princeedwardisland.ca/en...me-home-buyers

Loans on loans on loans babyyyyyy

I hope the liberals or anyone for that matter don't come up with a similar plan for the entire nation.

[killramos]

What ever happened to that bizarre liberal policy where they were incentivizing young new home buyers by taking equity positions in homes?

[ThePenIsMightier]

This quote is hidden because you are ignoring this member. Show Quote

A couple years back the PEI gov rolled out a program for first time home buyers, they essentially loan you the 5% down payment.

https://www.princeedwardisland.ca/en...me-home-buyers

Loans on loans on loans babyyyyyy

I hope the liberals or anyone for that matter don't come up with a similar plan for the entire nation.

Holy fuck, my hate keeps escalating for that provincial govt. The median house price in PEI is also only $250k.
This must've been a response to the price explosion in Charlottetown that started once Vancouver said "China can stop buying all these houses and leaving them empty" so a lot of Chinese investors started buying in Charlottetown.
They needed to show their broke-ass, career pogey collecting youth that "we are here for you". If someone ran for PM with a plan to combine the Maritimes into one province and strip away about a third of their MP's, I would commit election fraud to try and vote them in.

[Darkane]

Yeah there is going to be major fallout.

Also, it’s 9-18% potential loss.

I wonder if the second coming (or third, fourth, tenth? What boom/bust are we on?) of oil could be our salvation.

We won’t see the ramifications of this for another 6 months. That’s when it’ll begin. If anyone is thinking of selling, do it RIGHT NOW.

[ercchry]

This quote is hidden because you are ignoring this member. Show Quote

If you put 20% down, your mortgage is not insured. It's that not the rule, anymore?? Or, are you pointing out that new home buyers can't afford this, so it shouldn't be part of the discussion.

It’s in my original post, I’ve addressed it at least 4x now, this has to be a joke that this point. Right???

[ExtraSlow]

This quote is hidden because you are ignoring this member. Show Quote

It’s in my original post, I’ve addressed it at least 4x now, this has to be a joke that this point. Right???

Maybe if a more reputable member quotes you, people will read it.
"all mortgages are insured, really guys, for real, not just under 20% down. And mortgage defaults are incredibly rare, making cmhc wildly profitable, not a drain on taxpayers."

[ThePenIsMightier]

This quote is hidden because you are ignoring this member. Show Quote

It’s in my original post, I’ve addressed it at least 4x now, this has to be a joke that this point. Right???

I reviewed your first post and sorry, I don't think I understand enough of the acronyms to follow. I'm not furiously arguing with you at all because I really don't know much about this subject.

To ExtraSlow's interpretation - I still maintain that mortgages are not necessarily directly insured when the buyer puts 20% down. The lender only strictly requires that the property is insured; but, I control that insurance and I am the beneficiary of the policy that I am paying for. The lender is not the beneficiary. They hate this and they'll try to sucker you into a policy more favorable to them, but it's not legally required.
That's a huge difference because if my house is destroyed, I can take the insurance payout and buy gin & whores with it, rather than it going directly to paying my outstanding mortgage to the lender. If I'm the one paying for the insurance, I should control who the beneficiary is, and I do. That's not the case with CMHC.

Again, I'm not being aggressive and I'm happy to learn more about this. Sorry I'm having trouble following all the aspects of your position.

[ercchry]

Yeah no, you’re mixing up default insurance with say... mortgage protection insurance

CMHC is for the lender, and the people investing in mortgage backed securities

So rates these days go like this (ps: LTV is essentially the percentage of loan to equity/DP in the property)

So 80-95% LTV- cheap as fuck (like 5yr fixed is under 2% right now) this is the rate that everyone advertises, these are high ratio loans, this is where the average consumer knows THEY have to pay “cmhc”

75-80 LTV - conventional starts, besides refi/over $1m/rentals/amortization over 25yrs these have a shit rate, why? Cause the lender PAYS for the insurance, just like high ratio these rates drop with the more equity the property has

Then 0-75% same thing, better and better

The refi/rental/over $1m is the worst rates cause these are NOT insured. In Alberta these are non-recourse “jingle mail” loans

So why all these categories? Securities, lender bundles up a bunch of loans and sells them off to the market, more capital back for more loans. Where as uninsured loans cannot be sold off and sit on the balance sheets of the lenders, but not all lenders have deposits to offset these loans and have to pay for access to a big boi like national bank in order to even take on these loans.

[Masked Bandit]

I want to see if I'm reading the changes correctly:

- Before you could allocate up to 39% of your income to paying the mortgage NOT including things like utilities. Now, the number is 35% and it must include standard utilities?
- Before you could borrow money to use towards your down payment, now you actually need to have the cash.

errchy, are those points accurate?

[ercchry]

This quote is hidden because you are ignoring this member. Show Quote

I want to see if I'm reading the changes correctly:

- Before you could allocate up to 39% of your income to paying the mortgage NOT including things like utilities. Now, the number is 35% and it must include standard utilities?
- Before you could borrow money to use towards your down payment, now you actually need to have the cash.

errchy, are those points accurate?

Eh kinda, so before was 39/44 what’s included in both hasn’t changed. The “utilities” has always just been a number. This is why when a pro gives you a budget it’s always different than an online calculator. The 39 is GDS which is:

Mortgage payment @ benchmark (currently 4.94% at 25yr am)
Property taxes -new builds this is sometimes just a straight up 1% of home value
Heat - $75-$150/month depending on property and lender
Condo/HOA fees - at 50% of actual (no heat cost needed if proof it’s covered in fees)

The 44% is TDS, this is all debt obligations and some are calculated in fun ways depending on lender or what they are
Any revolving lines (cc, loc, student loans, etc) at 3%
Any secured lines over $25k can be amortized at benchmark over 25yrs
Phone bills can be ignored
Some lender use LIMITS on large LOCs vs balances
Some lenders can make exceptions to use min payments ca the above, more common in student loans

The change is now 35/42

So you can see it’s more of an attack on homes than actually fixing overall debt

[firebane]

Good lord.. Am I glad my closing date as a first time home owner is June 18th...

No way we could pull it off after these new rules come into effect.

[Masked Bandit]

This quote is hidden because you are ignoring this member. Show Quote

Eh kinda, so before was 39/44 what’s included in both hasn’t changed. The “utilities” has always just been a number. This is why when a pro gives you a budget it’s always different than an online calculator. The 39 is GDS which is:

Mortgage payment @ benchmark (currently 4.94% at 25yr am)
Property taxes -new builds this is sometimes just a straight up 1% of home value
Heat - $75-$150/month depending on property and lender
Condo/HOA fees - at 50% of actual (no heat cost needed if proof it’s covered in fees)

The 44% is TDS, this is all debt obligations and some are calculated in fun ways depending on lender or what they are
Any revolving lines (cc, loc, student loans, etc) at 3%
Any secured lines over $25k can be amortized at benchmark over 25yrs
Phone bills can be ignored
Some lender use LIMITS on large LOCs vs balances
Some lenders can make exceptions to use min payments ca the above, more common in student loans

The change is now 35/42

So you can see it’s more of an attack on homes than actually fixing overall debt

So the acceptable rate is 4% lower for the home debt portion but only 2% lower for overall debt including random consumer debt.

Despite the assumed reduction in property value, if the overall goal is to save people from themselves then I generally have to agree with the measures. I KNOW you see it on the regular, people stretched WAY too thin and the lightest bump in the road causes all kinds of problems.

[ercchry]

This quote is hidden because you are ignoring this member. Show Quote

So the acceptable rate is 4% lower for the home debt portion but only 2% lower for overall debt including random consumer debt.

Despite the assumed reduction in property value, if the overall goal is to save people from themselves then I generally have to agree with the measures. I KNOW you see it on the regular, people stretched WAY too thin and the lightest bump in the road causes all kinds of problems.

Then they would have reduced total debt by 4%... the goal is to curb home values nationally. We have seen a 20-40% reduction in inventory, so this is their response... cut out more buyers. Sure, nationality that makes sense... but in reality those numbers are due to only a few hot pockets of RE, and we here in Calgary are not one of them

But this also does nothing to fix fix people over borrowing and unsecured debt is left unchecked (you don’t even have to prove what you tell dealerships your income is to walk out with whatever car you want... even at sub 600 beacons)

This also does not effect uninsurable loans... ie. alternative and private lenders... OSFI still regulates alternative lenders... for loans over 65% LTV, but these companies’ only true limitations are the risk tolerances of their investors. If they see an opening in the market you best believe they will take it... and consumers pay with substantially higher rates

[J-D]

This quote is hidden because you are ignoring this member. Show Quote

Then they would have reduced total debt by 4%... the goal is to curb home values nationally. We have seen a 20-40% reduction in inventory, so this is their response... cut out more buyers. Sure, nationality that makes sense... but in reality those numbers are due to only a few hot pockets of RE, and we here in Calgary are not one of them

But this also does nothing to fix fix people over borrowing and unsecured debt is left unchecked (you don’t even have to prove what you tell dealerships your income is to walk out with whatever car you want... even at sub 600 beacons)

This also does not effect uninsurable loans... ie. alternative and private lenders... OSFI still regulates alternative lenders... for loans over 65% LTV, but these companies’ only true limitations are the risk tolerances of their investors. If they see an opening in the market you best believe they will take it... and consumers pay with substantially higher rates

I'm always fascinated by car dealership financing... When I finished University and landed my first job out of school, I bought a car about 2 weeks later... don't think I had even had my first pay check yet and they never asked for proof of anything

[nzwasp]

So when do these new rules take effect?

I have a friend trying to sell a house in West Hillhurst right now for high 700s and they are having a tough time, loads of showings though despite covid just no offers, im sure these changes arent going to make it any easier.

[killramos]

We got a ton of new showings and ultimately an offer once interest rates dropped.

This is going to wipe away all that demand and then some.

Glad to no longer have that other property dragging me down that’s for sure.

[ercchry]

This quote is hidden because you are ignoring this member. Show Quote

So when do these new rules take effect?

I have a friend trying to sell a house in West Hillhurst right now for high 700s and they are having a tough time, loads of showings though despite covid just no offers, im sure these changes arent going to make it any easier.

Commitments issued after end of June. That reminds me too... they already “curbed” over leveraging by implementing 10% down minimum on any amounts over $500k

[KRyn]

.