Title: Changes Announced to Effect Canada’s Housing Market
Jared Dreyer, President VERICO Dreyer Group Mortgages, President Mortgage Brokers Association of British Columbia (MBABC) – June 21, 2012
Summary: Jared Dreyer, Independent Mortgage Broker and Broker Owner of VERICO Dreyer Group Mortgages Inc. and President of MBABC highlights Mortgage Changes in Canada.
VANCOUVER, BC - The mortgage industry was caught off guard by government changes that are swiftly coming into effect July 9th, 2012. These changes however will ONLY affect purchasers who plan on putting less than 20% down payment on properties and are intended to support the long-term stability of Canada’s housing market overall.
Four measures were announced by Finance Minister Jim Flaherty who outlined these new rules impacting CMHC, Genworth and Canadian Guaranty; Canada’s high ratio mortgage insurers.
These changes speak to ensuring we have a strong first-time homebuyer who are building equity in their properties, soften debt exposure for Canadians and limit the loan to value ratios on higher priced real estate.
It is important to understand again that these current changes will NOT affect consumers providing a down payment of 20% or more.
1. Amortizations reduced to 25 years from 30 years. (on properties with less than 20% down payment)
A mortgage of $250,000 with a current 30 year amortization at 3.09% 5-year fixed rate = $1094.89 monthly payment
A mortgage of $250,000 with the new 25 year amortization at 3.09% 5-year fixed rate = $1227.54 monthly payment
Difference of $132.65 per month
2. Refinancing is REDUCED from 85% Loan-to-value (LTV) to 80% - no change to purchases. (It is important to note that most consumers currently choose to do refinancing to a maximum of 80% LTV to avoid insurance fees so this specific change should have very little impact)
3. Properties purchased over $1 Million no longer will eligible for mortgage insurance (If the home purchase price is under $1 Million dollars consumers can still purchase up to 95% LTV with insurance – anything over $1 Million dollars, 20% down payment is required).
4. GDS and TDS set at 39% and 44% - The reduction in amortization combined with the lowered GDS ratio could affect a number of people’s ability to qualify.
THE GOOD NEWS
The 5% down payment rule still remains in effect for property values under $1 Million dollars
These changes are an indication that interest rates will continue to remain low for some time. Interestingly, Ben Bernanke of the US Federal Reserve indicated a few days ago that the US may reduce interest rates further.
MORTGAGES CURRENTLY IN PROCESS
These changes will not affect mortgages already in place or approvals already issued by the lender.
It will however effect pre-approvals for purchases with less than 20% down with a 30-year amortization. The client will now need to re-qualify at the 25-year amortization.
As the mortgage qualification landscape becomes more complicated, it is critical consumers work with an independent mortgage professional that understand these changes and can help navigate the rules to ensure the best mortgage solution. www.dreyergroup.ca
*For sample purposes only. Rates are subject to change. On approved credit.
About the Jared Dryer, Dreyer Group Mortgages - Member VERICO Financial
Jared Dreyer, Accredited Mortgage Professional (AMP), is President of Dreyer Group Mortgage Brokers, a Member of the VERICO Financial Broker’s Network. With over 20 years of residential lending experience Jared is known as a consummate mortgage professional with the highest ethical standards.
A communicator, coach, leader and relationship builder, Jared leads one of the top mortgage broker teams in Canada.
As current President of the Mortgage Brokers Association of British Columbia (MBABC), and 2011 – 2012 Chair of the VERICO Financial National Advisory Council and 2011 – 2012 Director of the Mortgage Brokers Institute of BC (MBIBC), Jared works diligently to accomplish positive change within the mortgage industry.
About VERICO Dreyer Group Mortgages Inc
As a senior mortgage consulting team with vast experience in the financial services industry and thousands happy clients, Dreyer Group Mortgages helps clients make the right decision with their mortgage by providing a wide-range of mortgage options based on sound advice and expertise. Being an independent mortgage brokerage, Dreyer Group is not restricted to one financial institutions products and accesses over 40 lender mortgages coast-to-coast to shop the market and provide the best in mortgage solutions - helping clients save money and pay off their mortgage sooner.