CHANGES TO MORTGAGE LENDING REQUIREMENTS FOR FIRST TIME HOME BUYERS
DOWNPAYMENT – unless you are self employed, you can still purchase with 5% down as long as you qualify. If self-employed, 10% downpayment is required as long as your beacon score is over 650. If under 650, downpayment requirements increase depending on the score.
RENTAL INCOME – for qualifying purposes for purchasers of a new home with a rental suite, 50% of the rental income is now added to the yearly income which is termed a 50% "addback".
Previously to the change, we were allowed to use an 80% "offset" which meant that 80% of the rental income was actually deducted from the monthly mortgage payment. The difference between the two is substantial when helping to qualify. If the 50% addback were compared directly to the 80% off set, it would be approximately the equivalent of a 16% offset.
HST/GST – as per prior to changes, HST is only applicable to brand new builds OR homes that have been substantially renovated and would be subject to GST/HST however it is usually the seller responsible for paying the tax, not the buyer.
RATES – If you choose a 5, 7 or 10 year fixed term, the rate for that term will apply. For any term less than 5 years, (1 to 4 or variable), the clients must qualify at the POSTED or BENCHMARK rate which today is 6.10%. This is to ensure that clients are not being qualified at an extremely low rate. If the low rate is all they can debt service today, this could potentially cause future problems when rates increase.
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