Interest Rates Feb. 26, 2010
CREATIVE MORTGAGE CORP.
February 26, 2010 - Mortgage News and Rates
Mortgage Regulations
There were a few significant changes made to the mortgage industry by our Finance Department which will come into affect April 19, 2010.
1. The minimum downpayment on rental properties has gone from 5% all the way up to 20%. The main reason for this change was to try and slow down speculative investors from purchasing rental homes with very little down payment. Essentially a slight drop in the housing market would lead to many rental houses in a negative equity position. This would make the financial lending institutions very vulnerable as people could walk away from their home and mortgage, similar to what occurred in the US.
2. The maximum you will be able to refinance your home to is 90% of the value which is down from 95%. Again, what the finance department was looking to do here was prevent the possibility of an owner pulling out too much equity and making themselves vulnerable to having a negative equity in their house.
3. The rate that the lenders and mortgage insurance companies will use to qualify someone for a property purchase has changed. The new rules indicates that you can only qualify on a 5 year fixed rate even if you are wanting a shorter fixed term or variable rate. There is no clarification as to whether the lending institutions will use their posted or discount rate for qualification purposes. We will update you when they clarify this.
4. Lastly, the Finance Department really wanted to make it tougher to qualify for a mortgage based on a heavy reliance on the rental income. We have gone into more detail below as we see this as a new major obstacle for clients who are trying to get approved for a mortgage with rental income used as part of the mortgage payment from a qualification standpoint.
Renewing Mortgages
When it comes time for clients to renew their mortgage we want to make sure they should do their homework before committing to a new term and rate. Recently, we had a client come to us with a maturing mortgage term and the offering rate from the existing lender. The rate the lender was offering their existing client who had made all his payments on time was 5.10% on a 5 year fixed rate. To put that in perspective, we can offer him 3.69% on the same term. Too often do our clients fail to call us for rates and sign on the first mortgage offer from their existing lender expecting it to be the best rate available. The message we want to get out is to have your clients do their homework when it comes to mortgages. http://www.bankrate.com/can/news/mortgages/Jan10_mortgage_renewal_trasnfer_a1can.asp?prodtype=mtg
Rental Add-Back vs. Offset
As mentioned above, one of the major new regulations that are going to affect home buyers is the move from allowing rental offsets to now allowing only rental add-backs. The difference between the two sounds minimal but from a lending standpoint, it is huge! In the past most of the lenders that we used allowed a rental offset which would allow up to 80% of the rental income to be offset against the total mortgage payment. So for those homebuyers that would rely on rental income when qualifying for a mortgage can no longer be so dependant on the rental income. The new rule of rental add-backs to a maximum of 50% implies that only half of the total rental income will be added to the overall qualifying income amount which therefore would require a larger income to qualify for the same mortgage versus the 80% rental offset rule. This can really affect clients who are looking to get into the housing market and use the suite income to qualify for the mortgage. http://www.bcmortgage.ca/investment_rental_bc.htm Frustrated with your clients not being pre-approved?
Have them contact us for a quick pre-approval so that you never have a deal fall through because of financing.
We Value Your Clients:
Our main objective in working with your clients is to educate them on their financing options as well as provide them with adequate financing to help them purchase their home, investment or vacation property. We help clients see what they are capable of affording based on the rates we are able to offer. With our ability to fund mortgages with a high efficiency, we are able to pass along special rates that lenders offer us to your clients. We have the ability to set up mortgages all across Canada.
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BROKER'S BEST RATES
TERM | RATE* | PMT/$1,000** | APR |
1 YEAR CLOSED | 2.25% | $3.44/$1,000 | 2.26% |
2 YEAR CLOSED | 2.85% | $3.76/$1,000 | 2.87% |
3 YEAR CLOSED | 3.25% | $3.98/$1,000 | 3.28% |
5 YEAR CLOSED | 3.69% | $4.23/$1,000 | 3.72% |
7 YEAR CLOSED | 4.95% | $4.98/$1,000 | 5.01% |
10 YEAR CLOSED | 5.20% | $5.14/$1,000 | 5.27% |
3 YEAR VARIABLE | PRIME - 0.40% | $3.24/$1,000 | 1.87% |
5 YEAR VARIABLE | PRIME - 0.30% | $3.28/$1,000 | 1.96% |
PRIME RATE 2.25%
For more information give us a call
RED Indicates a Recent Rate Change
Shaun Pierce, AMP Lesley Pierce, AMP
Mortgage Consultant Mortgage Consultant
(250) 717 – 8949 (Ext. 102) (250) 717 – 8949 (Ext. 103)
Paul Cescon, BBA
Mortgage Consultant
(250) 717 – 8949 (Ext. 101)
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* Rates are subject to change and Lenders approval
** Payments based on a 35 year amortization and monthly payments
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