CMHC Rate Increase & More…
This is the blog version of the Winter Update 2014:
Insurer Rate Increase – Technical Details – and the B20 Rules Phase In.
1. Much to do about nothing: CMHC increases mortgage insurance.
- May 1st the new CMHC fee increase goes into effect.
- Genworth quickly followed, matching the effective date and premium increases. Canada Guaranty has not yet but is expected to increase their rates by the same amount – so rates for all will be the same but are not right now.
- To AVOID the increase:
- The purchase must be underwritten and submitted to the insurer by the bank BEFORE end of day April 30. We will still be in the Spring rush so banks may be backed up; it is important to avoid last minute rushes during this time.
- The fee is inconsequential. A $400,000 mortgage has a monthly payment increase of less than $10.
|
Down Payment |
OLD: One-time CMHC fee added to mortgage |
New fee May 1, 2014 |
|
5%(borrowed) |
2.90% |
3.35% |
|
5% |
2.75% |
3.15% |
|
10% |
2.00% |
2.40% |
|
15% |
1.75% |
1.80% |
Nowhere in the news: Very little is being discussed on self-employed borrowers without traditional proof of income. Their premiums are going up as well.
|
Down Payment |
OLD: One-time CMHC fee added to mortgage |
New fee May 1, 2014 |
|
10% |
4.75% |
5.45% |
|
15% |
2.90% |
3.35% |
|
20% |
1.64% |
1.9% |
|
25% |
1.00% |
1.15% |
|
35% |
0.80% |
0.90% |
Bottom line: for those qualifying on their tax paid income- much to do about nothing. For those needing to use self-employed “declared” income, there is a much greater premium increase.
2. More Importantly – Full Implementation of the B20 (and soon the B21) Rules
- Some of the banks are already underwriting with the new rules causing unexpected declines and delays.
- Banks are about to start using 3% of the balance for unsecured loans and credit cards as the monthly payment. Right now some are and some are not.
- Clients that have multiple properties or want to keep their existing home as a rental, to purchase another property are increasingly having a difficult time for various different qualification reasons. (rental offsets or rent added to income, secured lines used for down payment etc.)
Bottom line: Buyers that are close to the limits of the lending guidelines may no longer qualify. Many of them are self employed buyers but even the first time home buyer with a little bit of credit debt are having trouble. It is important that a buyer’s application is presented properly to the right lender and the right insurer the first time.
The Mortgages are Marvellous Advantage
Why not take advantage of the skills, years of experience, and non-biased advice of a professional, dedicated, top- broker with top-tier access to a variety of lending institutions for your buyers?
We fully pre-qualify your buyers before you go shopping: Your pre-approval is fully underwritten by a past senior bank employee. Income, down payment and credit information are in the file upfront and any wrinkles are ironed out before putting in an offer.
Mark Herman; AMP, B. Comm., CAM, MBA- Finance www.MarkHerman.ca
Katie McDowell ; Broker of Record
WINNER: #1 Franchise for Funded $ Mortgage Volume at Mortgage Alliance Canada, 2013
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