It’s begun. The message is starting to sink in. The new mortgage rules could eliminate 15% of Canadians from qualifying for a mortgage after January 1st, 2018. The mad rush has started as mortgage inquiries are up significantly.
WHO WILL BE AFFECTED?
- Anyone that has a mortgage renewal in next 12 to 20 months.
- Anyone thinking of buying in the next 12 months.
- Anyone that is needs or is thinking of refinancing their mortgage in the next 12 months.
- Rental property owners. Yes, you too.
- Future retirees with lots of home equity (newsflash..the new rules don’t take into consideration how much equity you have in your home.. your net worth is also irrelevant… it’s all about how much income you earn and declare…)
All of these borrowers will be affected. If you’re not getting the message, anyone with a mortgage should be getting a review done NOW. Don’t wait until next year. You may not qualify for a mortgage.
EXPECT HOME SALES TO SPIKE UP TEMPORARILY Continue reading “Review your mortgage NOW! Next year may be too late.”
CIBC Senior Economist, Ben Tal, spoke at this year’s annual Mortgage Broker conference in Montreal. The conference, organized by the Canadian Association of Accredited Mortgage Professionals, is a great place for Mortgage Brokers to meet all the Lenders and service providers under one roof.
It’s also a great opportunity to hear some of Canada’s experts talk about the economy, real estate, interest rates and the mortgage market. Here are a few highlights from Mr. Tal’s presentation.
-there are 12.5million households in Canada…31% rent, 69% own..
-of the 69% that own, 39.9% have a mortgage and 28.9% have no mortgage.
-69% of homeowners with a mortgage have more than 20% equity in their homes… only 30% have less than 20% equity in their homes.
-Renters have excellent cashflow… 96% of renters are using less than 40% of their income to pay for all their debts… so in reality, these renters could qualify for a mortgage based on their debt servicing ratios.. (most lenders allow borrowers to use up to 42% of their gross income towards a mortgage payment)…
One more comment that caught our attention was about Variable rate mortgages vs. Fixed rate… The historical data is overwhelmingly in favour of Variable rates….it’s really been a no-brainer… But what about now? Fixed rates are at historical lows… Mr. Tal said that Fixed rates might outperform Variable rate over the next 5 years… BUT it is so close that a 0.50% increase in Fixed rates would probably tip the scales back in favour of Variable…
That being said, we must also consider the flexibility of a Variable Rate product.. it does allow one to lock into a fixed rate at any time and it does allow for an early exit at a minimal cost…. For me, Variable rate is still better choice…for most of us.
Here’s an interesting statistic… 5 years ago, a 5 year fixed rate mortgage was around 4.35%… and the maximum amortization was 25 years…. a $250,000 mortgage would cost you $1363/mth.
Today, a 5 year fixed rate mortgage can be found at 3.89% (and lower)… and the payment is $1300/mth….. let’s increase the mortgage to $300,000 and use the new maximum amortization of 35 years… new monthly payment is $1303/mth….
Affordability is better than ever… these historical low rates will not be here forever.. make sure you are taking full advantage…. talk with your Mortgage Broker for full details…