Tricky changes to the mortge rules
Here is one of the changes of the mortgage rules that is now in effect – called the B21 Rules.
It will be sure to cause surprise for some customers that have large Line of Credits – LOCs
How the banks are now calculating monthly payments for secured lines of credit:
- The outstanding balance (not the limit) will now be amortized over 25 years using the Bank of Canada 5-year benchmark rate to determine the monthly payment
What that means …
For the calculation of your QUALFYING INCOME – as in, the way the government says your mortgage math is done – your total balance on your LOC is now treated:
- as a mortgage
- with a 25 year amortization and
- the rate used to calculate the monthly payment is the government’s “benchmark rate” which is about 5%.
This number is now used as your payment, not what the payment actually is.
more on the B20!
THE B20!
More on what the B20 is doing:
- According to simulation, 17% of high ratio mortgages funded in 2010 could not have been funded today.
- This includes 11% of prospective high ratio homebuyers who can’t qualify for a mortgage under the new 25 year amortization rule.
- Source: CAAMP Annual State of the Residential Mortgage Market, November 2012.
What Does This Mean for You?
Consumers’ buying power in the housing market has been affected. In order to adapt and continue to meet your clients’ needs, you need to work with a mortgage broker who knows how to get real estate purchases done.
We specialize in the most competitive solutions for borrowers who do not fit inside the traditional “A” Lending guidelines. This includes buyers who:
- Are self-employed or commissioned individuals with stated income
- Are salaried individuals with a GDS/TDS that does not meet traditional bank requirements
- Earn additional “soft income” on the side that may not be reported on taxes – like auto mechanics and computer programmers
- Have imperfect credit due to extenuating circumstances
- Are new immigrants to Canada – we love New-to-Canada buyers!
- And sophisticated residential real estate investors
If you know someone who does not meet the traditional “A” guidelines, call me today to for a discussion on what is possible for you.
Mark Herman, 403-681-4376
the B20 !!
There will be lots more on THE B20 – as it is the #1 issue with getting real estate deals approved right now.
To start with, that the B20 is:
- Needs multiple financing condition extensions
- Pre-approvals collapse at the bank and with on-line or inexperienced brokers
- Seemingly strong purchasers outright and irreversibly declined
- Losing out in multiple-offer situations
- Approvals taking forever
SUMMARY
The reason you are having a tough time removing financing conditions (COF) for your deals is called “the B20” and the details are attached. Have a read to find out why. Better yet, feel comfortable suggesting your clients use 1 of Canada’s Top-10, full-time, professional, fully-independent, mortgage brokers with a Master’s Degree in Finance, who knows what these rules mean and how to get your deals done. On time.
OUR SYSTEM, proven during the ‘06 – ‘07 boom, gives you the winning edge in multiple offers most of the time. BEFORE clients go shopping we get all the docs in. They are then reviewed by our past-head-underwriter (with $18 Billion in residential mortgages written) who discusses directly with the bank underwriters. We know the deals will work BEFORE they write an offer. In multiple offers we review the file to shorten condition time and work with you to write the winning offer.
More Data – and on my blog @ http://blog.MarkHerman.ca/
New mortgage guidelines have been issued to ALL mortgage lenders by OSFI – the Office of the Superintendant of Financial Institutions – causing every lender to modify their policies which:
- Significantly restricts the LTV (Loan-to-value) and overall qualification of mortgage amounts.
- Demands significant additional scrutiny and verification of ALL client documentation – banks can no longer paper over problems like before; causing many more outright, irreversible declines.
- Causes many banks and non-professional mortgage agents to take way too long to present approvals or produce irreversible “declines” on mortgages that were not properly documented or packaged.
Using an experienced, full-time, professional, high-volume mortgage broker is the best way to ensure your deals are completed on time, the first time. Why risk an irreversible decline for your client by using any random broker?
10 Year Term – Best Ever!
10-year fixed, full-featured mortgage is @ 3.69! (Portable, Assumable, Standard 3 month payout fee) See my comments in the Calgary Sun – full article on home page of my website: http://markherman.ca