23 Jun

CHMC Announces Changes to Underwriting Criteria

General

Posted by: Jenni MacDonald

On June 4, 2020, CMHC announced that they were tightening the underwriting policies for insured mortgages.  This means that if you have less than 20% down payment on the purchase of a new home, the rules will make it harder to qualify and you will qualify for less financing than before July 1, 2020.

The July 1, 2020 changes that CMHC have announced are:

  1. A minimum credit score of 680 will be required instead of the current 600, keep in mind that the credit score you get to see on Credit Karma is a Trans Union score and consumer scores are only based on 6 months of history whereas the score CMHC is referring to is a Bank Equifax score and is based on 6 years of history.  If you have questions on how to build your credit score, please visit my blog called “Credit Scores – How Do you Score?”
  2. Will reduce the total gross debt servicing ratios (cost of owning that house compared to income) to 35% of annual income, compared to the current 39% percent, and total debt servicing (all debts including the new house to income) to 42% versus as much as 44% now. This means currently a household income of $50,000 with no other debts could currently qualify for a purchase price of around $220,500.  With the new CMHC ratios that same household income of $50,000 with no other debts would be limited to a purchase price of about $191,700.  That’s about a $30,000 difference.  If you have other debts such as credit cards, loans, and lines of credit.  Your purchase price would be even lower.
  3. Borrowed down payments will no longer be acceptable. This was a rarely used option that very few lenders or banks ever used mainly because adding the monthly payment for the down payment loan or line of credit caused the ratios to be too high for clients to qualify for the mortgage they desired.  Gifted down payments are still allowed, as are 5% down payments from own resources.

Fortunately, CMHC is not the only insurer that Banks can use for insured mortgages.  There are two other companies, called “Canada Guaranty” and “Genworth” that provide insurance for lenders on insured mortgages.  The good news is that on June 8, 2020 both Genworth and Canada Guaranty have confirmed that they will not be changing their policies as CMHC has announced.  There are many Banks and lenders that will continue to use the other insurers during this time of change in Canada.

If you are wondering about the process to get a preapproval, we can complete a full process via online contact.  If you are looking for a list of documents that would be required for a full preapproval, please see my blog post “Documents”.

If you are interested in finding out more, I’d be happy to look at your mortgage options with you.

📲  View current mortgage rates

📲  Apply for a mortgage

19 Mar

Coronavirus (COVID-19) and Your Mortgage?

General

Posted by: Jenni MacDonald

We are in the middle of a worldwide roller coaster ride.

With unprecedented restrictions being implemented to deal with the Coronavirus (COVID-19) Pandemic, what do these extraordinary measures mean for you and your mortgage?

BANK OF CANADA RATE

With adversity comes opportunity – and our current mortgage situation is no different.  In order to keep our economy afloat, the government reduced the Bank of Canada rate on March 4, 2020 to 1.25%.  As a result of that decrease, most lenders also reduced their 5 year fixed mortgage rate.  Due to that rate drop, many buyers and refinancing clients were able to secure a great mortgage rate.  On March 13, 2020, the government dropped the Bank of Canada rate another 50 bps to .75%!  To my surprise, many lenders started to increase their rates immediately after this announcement!  If you are currently looking to purchase a property or refinance your current mortgage, this is an excellent time to see your Mortgage Broker about locking in a low rate.

 

MISSING A MORTGAGE PAYMENT

So what happens to your mortgage payment if you are not earning any income?  The government has waived the waiting period for Employment Insurance benefits for those who are quarantined (https://www.canada.ca/en/employment-social-development/corporate/notices/coronavirus.html).  But what if your workplace is shut down or you have to stay home to be with your children or you are in the service industry and you rely on tips to meet your monthly financial obligations?  If there is a chance that you cannot pay your mortgage payment due to an income reduction as a result of the COVID Pandemic, my first advice is to contact your lender immediately.  Many lenders have implemented emergency measures to help clients through this uncertain financial scene.  Putting a plan in place with your lender as soon as possible will help you avoid relying on credit that may ultimately hurt your credit score.  In most cases, your lender will allow you to miss some mortgage payments…. Please keep in mind that the interest you “miss” will still be added to the amount you owe on your mortgage.

INSURED MORTGAGES

If you originally purchased your property with less than a 20% down payment (and have not refinanced your mortgage since), your mortgage is most likely insured by CMHC, Genworth or Canada Guaranty.  Contacting your lender the moment that you feel you will not be able to make your mortgage payment is vital.  CMHC and other mortgage insurers offer tools to lenders that can assist homeowners who may be experiencing financial difficulty. Their default management tools default management tools include: payment deferral, loan re-amortization, capitalization of outstanding interest arrears and other eligible expenses and special payment arrangements.  (https://www.cmhc-schl.gc.ca/en/media-newsroom/Notices/2020/cmhc-statement-covid-19).

DEFERRED MORTGAGE

Canada’s six largest banks announced plans to provide financial relief to Canadians impacted by the economic consequences of COVID-19.

Effective immediately, Bank of Montreal, CIBC, National Bank of Canada, RBC Royal Bank, Scotiabank and TD Bank have made a commitment to work with personal and small business banking customers on a case-by-case basis to provide flexible solutions to help them manage through challenges such as pay disruption due to COVID-19; childcare disruption due to school closures; or those facing illness from COVID-19. (Read more https://www.scotiabank.com/corporate/en/home/media-centre/media-centre/news-release.html?id=3510&language=en)

There is no need to panic.  The government, the lenders, and the insurers are all aware of this time of uncertainty.  If you are not sure about your circumstance, please reach out for advice.

If you are interested in finding out more, I’d be happy to look at your mortgage options with you.

📲View current mortgage rates

📲Apply for a mortgage

10 Dec

Cornwall & Area, a growing Economy

Latest News

Posted by: Jenni MacDonald

21 REASONS WE LOVE CORNWALL, ONTARIO & AREA

Why Do We Love Cornwall, Ontario?

A local Century 21 Real Estate Agent, Mike VanderMeer, and I have compiled a list of the reasons we love Cornwall, Ontario.  We’ve compiled 21 reasons, which we will share with you, one at a time.  We would love to hear the reasons you love to live here too!

REASON #20 – Economic Growth

After the closure of Domtar, Cornwall had to redevelop itself. Being known as smelly, the armpit of Ontario, etc., we had to do something to fix our image.  The city has done a great job not only in bringing new employers but also in cleaning up our city. Now Cornwall is booming with possibility.  We are seeing constant and rapid residential property growth with condos and new subdivisions being built and new homes popping up left and right.  PLUS, there is no more odor from a paper mill.

Looking for work?  There is no lack of opportunity in Cornwall & Area for those looking for a career from warehouse work to customer service.  You can find all the open opportunities at choosecornwall.ca.

“Cornwall, much more than you expect.  For much less!”

There’s no doubt that Cornwall loves to dine-in and dine out.  Plenty of new restaurants are popping up all over the city.  Like Taco Bell, Mary Browns Chicken, Birchwood Cafe, Brunch On Pitt St., as well as many others.

If you’re looking for employment opportunities and an affordable city to live, then Cornwall is for you.

If you’re looking for a small city with big-city amenities, then Cornwall is for you.

Start 2020 on the right track, start it in Cornwall, Ontario,

Check out the first 19 reasons to Love Cornwall & Area 📲 http://jmacdonald.ca/blog/

and stay connected with me on Facebook to see the rest as I post them 📲 https://www.facebook.com/JenniMacDonaldMortgages/


If you are interested in relocating to Cornwall, Ontario or the surrounding area, I’d be happy to look at your mortgage options with you.

📲View current mortgage rates

📲Apply for a mortgage

15 Nov

Winter Activities in Cornwall and SD&G

General

Posted by: Jenni MacDonald

21 REASONS WE LOVE CORNWALL, ONTARIO & AREA

Why Do We Love Cornwall, Ontario?

A local Century 21 Real Estate Agent, Mike VanderMeer, and I have compiled a list of the reasons we love Cornwall, Ontario.  We’ve compiled 21 reasons, which we will share with you, one at a time.  We would love to hear the reasons you love to live here too!

REASON #18 – Winter Activites

If you love winter, you will love Cornwall & Area for its many winter activities. Cornwall has great activities such as curling, skating, hockey, ice fishing and if you like to ski many great slopes within driving distance. You can also enjoy miles of groomed trails throughout S.D&G if you like to snowmobile or 4Wheel. If you are an NHL fan, a short one hour drive gets you to a live game in Montreal or Ottawa.

Get information on local curling 👉 https://cornwallcurling.ca/

Get locations of skating ricks 👉 https://www.cornwall.ca/en/play-here/outdoor-venues.aspx

For additional information on winter activities and events, visit our local tourism website

www.cornwalltourism.com

www.sdgtourism.com

 

Check out the first 17 reasons to Love Cornwall & Area 📲 http://jmacdonald.ca/blog/

and stay connected with me on Facebook to see the rest as I post them 📲 https://www.facebook.com/JenniMacDonaldMortgages/


If you are interested in relocating to Cornwall, Ontario or the surrounding area, I’d be happy to look at your mortgage options with you.

📲View current mortgage rates

📲Apply for a mortgage

15 Jun

Refinancing In The New World

Latest News

Posted by: Jenni MacDonald

Refinancing

There were many changes to the mortgage rules in the last 7 years and in January, 2018, in particular.  One of the rule changes was regarding refinancing your home.

In The “Old” Days

About 10 years ago, you could refinance your home all the way back up to 95% of its current value.  Many borrowers could basically use their home as a giant ATM machine and pull out equity easily and quickly.  The problem with using all the equity in a home is that sometimes the real estate markets will decline.  Sellers can not sell their property for the amount that they owed.  Many home owners were stuck either living in their current houses, keeping it as a rental or taking a loss on the sale and finding new money for a down payment on a new property.  That rule changed so that you could get up to 85% of value and is now at 80% of the appraised value available for a refinance.  This was hard to get used to but, in the long run, is better for home owners.

Until January, 2018, lenders were insured by the government for the new refinanced mortgages.  The Banks and monoline lenders were happy to refinance clients to 80% of the value of their properties.  January 1, 2018, this all changed.  Welcome to 2018 and today you can still refinance your home to 80%.  However, the government not insure a refinanced mortgage now.

IN 2018

What does that mean for the average consumer?

First, it means that lenders do not offer the same rate for insured mortgages (purchases and switches – in some cases) as they are for refinances. Refinance clients now pay, on average, .30% higher interest for 5-year fixed rates and  .55% higher for variable compared to a purchase or switch/transfer mortgage.  Compound this with recent increases in mortgage rates.  Qualifying for the full 80% value is getting more difficult – especially if you are on a fixed income.

Secondly, because refinancing is no longer insured by the government, lenders have made the criteria harder to qualify.  My experience in the last few months has been that Beacon scores have to be above 700.  Also, many lenders are no longer refinancing clients that have had a bankruptcy discharged in the last 6 years .

Third, to add to this extra cost, the new rules of qualifying at 2% over the interest rate you will pay (stress test), applies to refinancing.

Overall, the changes make it tougher to refinance and forces Canadians to seek alternative options to take equity out of their homes. In many cases this will mean looking to the private sector at higher rates (8% – 15%  plus fees) when they need that money.

With the new complications of the mortgage industry, getting good advice from a Mortgage Broker is even more important.  If you have any questions about refinancing, contact me at 613-551-0639 or www.jmacdonald.ca

 

16 Feb

What Do These Changes Mean to Me? Part 4

General

Posted by: Jenni MacDonald

Credit Scores and Documentation Changes:

In 2008, lenders were required to be more diligent proving a borrower’s ability to make mortgage payments.  Documentation requirements became almost painful.  Clients often lament about the lender wanting everything except their first born.  As consumer debt in Canada continues to increase, the government will continue to change lending rules to protect both the lender and the borrower.  Credit scores are your only real power when it comes to borrowing.  If you aren’t sure how to build your score, please contact me for a free consultation and we can put together a plan to make your credit score solid!

 

Maximum Refinance Amounts Changes:

In 2012, the maximum loan to value for a refinance changed from 85% to 80% of the value of your home.  Lenders were finding that consumers were using their homes as an ATM machine.  The concern was that Canada would have a generation of retirees with no equity in their homes and no pensions to pay their debts.   This continues to be an area of interest and may undergo changes in the future.

 

Qualifying Payments Changes on Credit Cards and Lines of Credit: 

Probably the most influential change that I have seen is the 2013 decision to change qualifying payment amounts.  Lenders now require 3% of the outstanding balance on credit cards and unsecured  lines of credit to be added to the total debt to qualify for a mortgage.  Prior to this change, you could use the required minimum monthly payment on your credit card or line of credit.

He’s an example….  You have an unsecured line of credit for $30,000.  You pay the minimum monthly payment and maybe a little extra when you have the funds.  Let’s say $200 per month.  When you apply for a mortgage was have to use 3% of the balance owing as your monthly requirement:  In this case, $900 per month.  That’s an extra $700 per month that gets added to your debts even though, in real life, you are only paying $200!

Conclusion

Each mortgage rule change on its own is not a problem.  When we compound all the changes, it’s difficult to navigate the mortgage options available.  If you are in the middle of purchasing or refinancing your home, please contact me.  We can go over your particular situation to get the mortgage that’s right for you.

Jenni MacDonald

14 Feb

What Do These Changes Mean to Me? Part 3

General

Posted by: Jenni MacDonald

Maximum Amortization Changes:

The second major change for mortgages in Canada is the maximum amortization period that a home owner can get.  Before 2008, a property owner could get a 40 year amortization.  In 2008, that changed from 40 years to 35 years.  In 2011, from 35 years to 30 years and recently, in 2012, the maximum amortization for most mortgages changed from 30 years to 25 years.  Some longer amortizations were available from some lenders with over 20% equity in your home but the new announcement limits that possibility.  If lenders decide to continue some amortizations over 25 years, a higher interest rate may be charged.

 

The amortization is the number of years that the total mortgage can be spread over.  The longer the amortization, the longer it takes to pay off your mortgage but the smaller your mortgage payments.  For instance, on a $200,000 mortgage amortized over 40 years (at an interest rate of 3%), the payments would be $713.83 monthly.  The same mortgage amortized over 25 years is $946.49.  That’s a monthly difference of $232.66.  This could be the difference between an approval or a decline.

 

The significance of this change is not only the amount of mortgage payment that you use to qualify your initial purchase but also influences your refinance options in the future.  If you want to refinance your home and you currently have over 25 years left on your mortgage, you have no choice but to use the new maximum refinance amortization of 25 years or less.  This may limit the amount of mortgage you can qualify for in order to pull out equity from your home.

Down Paymen

ts Change:

In 2008, the minimum down payment allowed on the purchase of a property officially changed from 0% to 5%.  In reality, many lenders continued to offer options like 5% cashback that a buyer could access for their down payment.  Now, borrowers can no longer use the cashback option for down payments.  There are a few lenders that allow borrowed down payments but they are few and the qualification requirements are stringent.   The best options for down payment are saving from your own resources or a gift from an immediate family member.

If you are in the middle of purchasing or refinancing your home, please contact me and we can go over your particular situation to see if this change will affect your ability to get the mortgage you are looking for.

Jenni MacDonald

613-551-0639

Mortgage Broker

Dominion Lending Centres The Mortgage Source

13 Feb

What Do These Changes Mean to Me Part 2

Latest News

Posted by: Jenni MacDonald

November Mortgage Rule Changes

The result of the November, 2016 change is that many non-bank lenders have already cancelled the mortgage products available for rental properties and refinances.  The impact for Cornwall borrowers is already significant.  As a small market with a large rental portfolio, Cornwall borrowers looking to get refinance mortgages on their rental properties are limited to major banks.  When rental property owners are approved by the Bank, the changes have made rental mortgage products more risky, so there is now a premium on mortgages for rental properties.

Also, single family home rentals are now not accepted by most lenders.  Self employed clients have fewer choices to obtain a mortgage.  Owner occupied home owners in our area have been forced to use Bank lenders.  Unfortunately, many property owners do not meet the stringent rules of major Banks.  With the loss of the smaller lenders, Banks will not have the competition we have established in the Canadian mortgage market.  Loss of this competition will allow Banks to increase mortgage rates at the cost of the Canadian consumer.

Traditionally, many lenders have been hesitant to lend in Cornwall and with these changes, we have lost even more lending options.   The result I have seen in Cornwall already is that private lender mortgages are needed more than before.  These mortgages are very expensive and should be used as a short term solution.  These changes leave the borrower in these high rate mortgages for longer terms.

Qualifying Rate Change:

On October 17, 2016, the government made the changes to control the housing markets in Vancouver and Toronto but we are all affected by the decision.  Unfortunately for the smaller lenders, big banks can still choose to qualify the mortgage at the contract rate while the smaller lenders do not have the option.  This gives the Banks an unfair advantage.

Basically, until now, when you apply for a 5 year fixed mortgage, your ability to pay for the mortgage was calculated on the actual rate you would pay (around 2.49%).  If the amount of your total debt came in around 44% or less compared to your gross income (depending on your credit score and the lender you were working with), you would likely be approved for the mortgage.  With this change, you will still pay 2.49% interest but in order to qualify how much your mortgage payments will cost you, the payments are calculated at the posted rate (currently 4.64%).  The posted rate has been used to qualify variable rate mortgages, Home Equity Lines of Credit and 1-4 year term mortgages for years.  This change now requires 5 year fixed mortgage terms to be included as well.

That may not seem significant but let’s look at a specific situation:

You want a mortgage of $200,000.  With a 25 year amortization at a 2.49% interest rate for the 5 year term, the payments would be about $894.94.  That amount is added to your other monthly debts and your ratio has to come in under 44% compared to your gross income.  The new rule means, even though in real life you will be paying $894.94 each month for the next 5 years on your mortgage, the application will have to show you will be paying $1,122.96 each month for the next 5 years and still calculate under 44% compared to your gross income.  That’s an extra $228.02 per month added to your total debts.  It can make the difference between an approval or decline if your credit card debts are fairly high.  You may not qualify for the full $200,000 anymore.

If you are in the middle of purchasing or refinancing your home, please contact me and we can go over your particular situation to see if this change will affect your ability to get the mortgage you are looking for.

Jenni MacDonald

613-551-0639

Mortgage Broker

Dominion Lending Centres The Mortgage Source

 

13 Feb

What Do All These Mortgage Changes Mean to Cornwall, Ontario? Part 1

Latest News

Posted by: Jenni MacDonald

Recent Announcements

With the sudden mortgage changes announcements on Monday, October 5, 2016, came a flood of concerns about the impact of the upcoming changes.  In reality, these are just more major changes in the mortgage landscape in Canada.  While each change on its own is not completely overwhelming; the combined effect of these changes has significantly impacted the possibility of getting a mortgage.  These changes effect home owners in Canada, and Cornwall, in particular.

Changes

The major changes that affected most of Cornwall area property owners in the last 8 years are:

  1. October changes to the qualifying rate on a 5 year fixed mortgage from the actual rate (around 2.69%)  to the qualifying posted rate (4.64% at this time) (2016)
  2. Maximum amortization changes for an insured mortgage from 40 years to 35 years (2008), from 35 years to 30 years (2011) and from 30 years to 25 years (2012)
  3. Minimum down payment changed from 0 to 5% (2008)
  4. Changes to documentation and credit score requirements (2008)
  5. The maximum refinance percentage changed from 85% to 80% (2012)
  6. Qualifying payment amounts changed on unsecured lines of credit and credit cards to 3% of the balance owing instead of required minimum payment amounts on statements (2013)
  7. Portfolio (bulk) insurance must now meet the same criteria as those that are high-ratio insured. This change effects obtaining a mortgage for: over 25 year amortization, rental and investment properties, refinances and homes with values greater than $1M.  They can no longer be bulk insured.  The long term effects have yet to be determined but in the Cornwall area alone, there have already been negative results.  (November, 2016)
  8. New increased capital requirements to be held in reserved for non-bank lender. (January, 2017)
  9.  Increase to CMHC insurance premiums. This is the third increase in three years. (March 17, 2017)
  10. “Risk sharing” model for lenders to share in losses of insured mortgage claims. (Proposed)
  11. Implementation of regional-based pricing.  (Proposed)

Results

Over the next few weeks, we will go over each of these changes and their effect on your qualification for a mortgage.  In the meantime, there is no need to panic but it may be time to evaluate.  If you are in the middle of purchasing or refinancing your home, please contact me and we can go over your particular situation to see if the recent changes will affect your ability to get your mortgage.