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.
Worried about oil prices and the Calgary housing prices?
Have a look at this TD report about the price of oil and the Canadian economy.
Highlight: TD expects the Bank of Canada to keep rates the same until mid-2015.
Link to the TD report, outlining the various outcomes of the recent fall in the price of oil.
More on how Banks “get ya” with payout penalties
The beginning of a great article below goes more into the details on what the BANKS do to you when you get their low rates deals like the BMO 2.99% – which everyone now says is not a great deal as you must sell your home to get out of it – among other things. Ensure you always use a broker for your mortgage.
Low mortgage rates tempt, but penalties for breaking can be high!!
You want some of these record low rates on the market but you’re locked into a mortgage. Just break it, right?
Not so fast, there’s a key question you need to ask before you commit to break a mortgage: how much will it cost you? Actually, it’s a question you should be asking before you sign up in the first place.
Don Hurman, a 64-year-old from Okotoks, Alta., learned the hard way when he incurred a $10,000 penalty after selling his house halfway through a five-year mortgage term. Some mortgages let you port the loan to a new home but Mr. Hurman was forced to break his and pay what is called the interest rate differential.
http://business.financialpost.com/2014/04/12/be-careful-before-you-break-that-mortgage/