Toronto and Vancouver Mortgage Rules to Change Starting mid-February

Planning to purchase a new home? Moving to Toronto or Vancouver soon? You might be in for a surprise starting February 15,2016! Vancouver and Toronto’s housing markets are at a frenzy and the Liberal government turned to tweaking lending rules in an effort to cool them down.

The Big News

In an announcement a few weeks ago, it was revealed that new residential mortgages with portions in excess of $500,000 will be subject to a 10% down payment instead of the current 5% –  a change that will take effect a month from now. The first $500,000 will still be subject to a 5% down payment and existing mortgages will remain as is, with homes costing more than a million still having to follow the required 20% down payment, as shared by Finance Minister Bill Morneau.

Benjamin Tal, CIBC’s deputy chief economist says that Calgary could get hit hard by this change – because it has a relatively large share of high-ratio mortgages compared to other places.

A Matter of Safety?

Different policy changes had been placed in effect in recent years to limit Canadians’ vulnerability to financial risk in the event of a correction in the housing market. Since 2008, there has been four occasions when mortgage rules had been tightened to cool off blistering real estate markets. The cooling effect is indeed effective, albeit it should be noted that the effects are only temporary.

Morneau told reporters in an interview that the increase in down payment is believed to help with stabilising the entire market as well as make people more secure by creating a buffer. It is estimated that about 1% of the total market will be affected by this change; a number that is equivalent to an estimated number of less than 10,000 home purchasers.

Morneau further shares that the move is aimed to cool down and keep the housing market stable; more so for Toronto and Vancouver, both of which are sporting fiery hot real estate markets. 4% of Toronto’s home sales and 6% of Vancouver’s home sales are above $500,000; a big difference compared to the national average of only 1%.

The Minister also shared that the change is planned in such a way to not have a negative impact on certain markets, like Alberta’s where the situation is more challenging.

The announcement has been widely expected in light of growing concerns that homeowners could end up being in a very tight situation if prices suddenly collapse in an overheated market.

Comes with a Price

What does this mean for the aspiring home owner? A lot, apparently.

Those who may be planning to purchase a pricier home in Vancouver and Toronto might be ‘forced’ to put off doing so because they would have to save up more money for the down payment, not to mention having to meet some mortgage requirements like having a minimum annual income of $120,000 with no debts to qualify if someone wants to purchase a half million-dollar home. A family or individual with a monthly income of $7,000 after taxes and spends $5,000 to $6,000 on monthly expenses will need a few years to save up for the new down payment – something that’s not to be taken lightly.

Need help getting approved for a home mortgage or have some questions regarding this mortgage news? Meeting your real estate financing needs is our expertise! Contact us today!

3 Things You Need to Know About Home Mortgages

Buying your first home is a proud moment! Who doesn’t want to own their own home? The problem is that a mortgage can be the most expensive bill you’ll ever have to face, but if you plan ahead you’ll be able to avoid a lot of the pitfalls that come with home mortgages. Here we’re going to go over everything you need to know and about getting the right mortgage and how to avoid the wrong one.

What’s the Difference Between Pre-Qualified and Pre-approved for Mortgages?

Pre-qualified and pre-approved are two of the most important terms you’ll hear when dealing with home mortgages. Being pre-qualified means that you can get a rate over the phone and can walk into the bank and get a rate… just like everyone else who is applying for financing. Being pre-approved means getting a good faith estimate of how much you would pay every month, how much financing you can qualify for and other important things you need to know when dealing with mortgages. No matter what lenders tell you, being pre-approved doesn’t mean you have to do business with them.

Don’t Settle on the First Lender You Talk To

If one lender gives you a good deal, there will always be another who will give you a better deal. This is why it’s important to comparison shop before choosing the lender to finance your home mortgage. With a Toronto mortgage broker you’ll get an experienced and friendly local expert to help you get a better deal. It’s important that you compare not just loan amounts but interest rates, monthly payment estimates and terms as well. While one lender may give you fantastic interest rates, they may turn around and hit you with penalties that triple the interest rate in six months because you pay your payment early.

The most important reason you shouldn’t try to comparison shop on your own is this: when lenders check your credit report they bring down your credit score. But if you can apply to many different lenders within two weeks of the first checking your credit report, you’ll be able to avoid excessive damage to your credit as well as find the right lender for your needs. Why should you hope and pray that a lender will give you financing when banks are eager to get your business?

The Difference Between Conventional and Private Home Mortgages

A conventional mortgage is financing granted by a traditional lender like a bank; these can be troublesome for people who have gaps or issues with their credit history. Private home mortgages on the other hand don’t really use credit to factor in what kind of mortgage people can get, but favour things like equity and collateral more. Each will have its plusses and minuses so you’ll want to speak with one of our Toronto mortgage brokers to make sure you get the right solution for your needs and situation. Why take what you can get when you can make lenders compete?

To find out how we can help you find a great mortgage, apply online here!

Buying Your First Home with a Home Mortgage

Buying a home for the first time when you’re Canadian is a unique experience. There’s now a dizzying array of options for borrowing: private mortgage lenders, second home loans and home equity loans, they can all be confusing! If you want to get a good deal and understand the contract you’re entering into for the next 30 years, you need a mortgage broker. Here we’re going to go through what you need to know about home mortgages.

Are You Ready to Buy a Home?

Before you start shopping for mortgages, you need to ask yourself if you’re really ready to buy a home. Is your credit in need of repair? If so check out our page on debt consolidation. Do you have steady employment, or do you have a job that is hard to prove income (self-employment or small business owners for example)? With a mortgage broker you’ll have a helping hand to prove your income and will make the mortgage process so much easier.

What Home Should You Buy?

While you might love the look of one home, you’re going to want to look at many different homes. Do you want a neighbourhood where you can walk around or do you want the ultimate self-sufficient condo? These are the kinds of things you’re going to have to take into consideration to make sure you get the right home. Since most home mortgage rates run between 15 and 30 years this is going to be your home for a long time to come. Make sure you can love it and live in it.

The Home Mortgage Process Explained

You need to shop for your home loan BEFORE you start looking at houses. A mortgage broker will help you find a great rate and a good amount that gives you breathing room to find your dream home. A real estate agent will work from there; knowing your budget helps you save money applying for homes and having home inspectors to come out. You’ll also know that a house is just out of your range and won’t have to waste time thinking about what could have been.

Once you’ve been approved and sign the papers, you own a house! You’ll have to pay your loan on time or you may face penalties. Working with a mortgage broker you can make sure that the terms of the agreement are fair and sensible; there are many terms that can make little sense and come back to bite you later. Prepayment penalties charge you more for paying ahead of time, and balloon payments blow up your loan payments to insane heights when you’re ready to close it out.

Is a Home Mortgage Right for You?

If you need money for the down payment on your house, you need a home mortgage. There’s just no way around it, and you’ll be able to get into the home of your dreams. With the help of a mortgage broker you’re going to be able to get a fair rate and pay off your home in a shorter amount of time.