If you are like me..you read real quick and sometimes don't get the full explanation and can get bogged down by the details...so
YOU DONT NEED 20% DOWNPAYMENT TO BUY A HOUSE TO LIVE IN !
The changes are :
- Require that all borrowers meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term. This initiative will help Canadians prepare for higher interest rates in the future.
- Lower the maximum amount Canadians can withdraw in refinancing their mortgages to 90 per cent from 95 per cent of the value of their homes. This will help ensure home ownership is a more effective way to save.
- Require a minimum down payment of 20 per cent for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation.
So...what does this mean to you if you are in the buying mode or thinking about buying a home this year. If you are buying a home on PEI...not much in my opinion. Our real estate prices don't get pushed through the roof that will not allow a choice in a house for a working couple but as with all things it depends on your own situation. I recommend discussing with a mortgage professional to determine what you can afford.
If you are buying a home for your own use and you need to borrow more than 80% of the purchase price than the only new rule to affect you is the first one...when you are getting qualified by your lender when they input your data (income, expenses, debts, credit score etc) you will have to be able to qualify based upon using the current 5 year mortgage rate. You can still pick a variable, 1 year, 2 year, 3 year etc mortgage but you have to qualify as a minimum on the 5 year rate.
Some lenders already were using these guidelines for their own lending regulations.
If you own a home now and you were looking to refinance it - the second rule says that you can only take out 90% of the value of your home instead of 95% which was allowed by some lenders. This does address the issue of having little equity in your home....like all loans at some point you have to pay it down...this is a bit of forced savings but since they are insuring the lenders money...it is a good thing...even though the collateral is the property if issues pop up and defaults occur...it doesn't take long to have 5% gone in expenses.
The third rule affects people who were looking at buying properties for speculation and they weren't planning on occupying it...this means that they now have to have 20% downpayment..some lenders prior to this announcement looked at insured properties with 10% downpayment but had strict lending guidelines.
Sure buying property is a scary thing and full of emotions and it doesn't help if you hear that the government is changing the rules but like all important decisions...do your research and consult with a professional.
At Century 21 Colonial Realty we have capable REALTORS and we also have a mortgage brokerage - CENTUM Advantage Financial Group Inc-on site with 2 very capable brokers to help you with your questions, concerns and will guide you each step of the way.
If you have any questions or need assistance...feel free to contact me with any questions and I will do what I can to get the right information to you.
Joel Ives-Owner 902-566-2121 office
Cell/Text 902 626 6970