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Posts Tagged ‘Mortgage’

Self Employed? Changes to CHMC Mortgage Insurance

Monday, March 8th, 2010

Policy Changes to CMHC Self-Employed

CMHC is also announcing policy changes to the CMHC Self-Employed Product Without Traditional Third Party Validation of Income. Effective April 9, 2010, self-employed borrowers with more than 3 years in the same business and commissioned-income borrowers will be required to confirm their income and will not be eligible for the Self-Employed Product Without Traditional Third Party Validation of Income. This product is intended for a small portion of borrowers who find it very difficult to document income – in particular, recently self-employed borrowers. For the majority of self-employed borrowers, income validation is readily available through financial statements, contracts, T4s and other third party income validations. The changes will ensure that self-employed borrowers with third party income validation will benefit from a lower premium. Furthermore, the maximum loan-to-value ratio available under the CMHC Self-Employed Product Without Traditional Third Party Validation of Income will be reduced from 95% to 90% for purchase transactions and from 90% to 85% for refinance.

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Mortgages for Commercial Property

Friday, March 5th, 2010

Commercial lending can be a very challenging arena to enter. There are a limited number of Lenders that will consider Commercial deals. A deal is generally considered to be commercial if it is a Multi-residential building with more than 4 units, an office or retail building, industrial condo’s or buildings, and any other type of income generating property that is NOT residential.

Once a Property is considered Commercial, a few things change when looking into Financing the property. Generally you will require more money as a down payment. Anywhere from 15% to 50% depending on the type of property. The interest rate on the Mortgage will be higher than current posted Residential Rates. And you may require private lending as opposed to a traditional bank.

Your best approach to financing a commercial property is to work with a Mortgage Broker who has access to Multiple Lenders, and will have experience placing many different types of commercial properties. Mortgage Brokers usually have contacts in private lending also, that may give you some flexibility. For example if a Lender on an office building is only willing to loan up to 65% Loan to Value, your Mortgage broker may be able to find Private funds for a second mortgage up to 75% or even 85% so you need to invest less of your own funds.

If the building is being purchased by a corporation, generally the lender will require the Personal Gaurantee of the principals behind the Corporation.

To apply for a commercial mortgage the following information will be reviewed:

Typical Information Required to Obtain Detailed Loan Proposal
• Loan Amount Required and Purpose
• Rent Roll or Leases
• Project Operating Statements
• Ownership Details
• Pictures / Property Description
• Details of Registered Debt or Purchase and Sale Agreement

For more information about Commercial Lending please contact us by using our contact page or the comment form below, and one of our Licensed Mortgage Agents will be in touch with you within 24 hours.

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Do you Dream of Owning a Cottage?

Wednesday, March 3rd, 2010

The new Mortgage rules that were implemented in April do not change the current guidelines for borrowing to buy a second home, i.e. a Cottage. The dream of owning your own family getaway may be closer to reality than you think!

Now is the perfect time to buy a cottage;
-Interest Rates are still low,  (especially the variable rates)
-The HST is not yet in effect, (coming July 1st)
-Markets just before the summer in cottage country are slightly lower, and sellers more motivated to sell.

You can buy a cottage with as little as 5% down payment. The source of this down payment can be the existing equity in your own home, as well as other sources, i.e. RRSPs, gift, etc.

Mortgages for a cottage (second home) are treated the same as your primary residence and you may qualify for an interest rate as low as the current lowest posted 5 year fixed rate or Variable Rate

“As a cottage owner in Muskoka, I understand how important realizing your dream is. As a Mortgage Agent, I want to help you make your dream a reality.”, Sarah Hurson Mortgage Agent # 09002165

For more information please complete the confidential contact form below, or on our Contact Page, or email us directly mortgages@dropmyrate.ca or call toll free 1-866-712-3943

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Mortgage Changes Coming in April

Monday, March 1st, 2010

A few weeks ago Finance Minister, Jim Flaherty, announced new mortgage rules will be implemented in Canada on April 19th. The reaction across the country has ranged from panic (for those investing in rental properties or flipping homes), to indifference. Overall though, I sense a lot of confusion over the announcement as many people just do not understand the changes.

I have been contacted by clients and Real Estate Agents that are confused about the new rules, and the most common question I am getting is from first time home-buyers concerned that they will need a 10 or 20% down payment. This is not the case.

Here is an overview of the changes:

1. Tighter restrictions to Qualify for a Mortgage

All ARM (variable rate mortgages) and Fixed mortgages with terms less than 5 years are to be qualified at the 5 year posted rates.

Currently most banks use the 3 year posted rate to qualify ARM clients. The current spread between a 3 and 5 year posted rate is approximately 50 bps. This will reflect higher debt service ratios many borrowers, making slightly more difficult to be approved IF the borrower has a large debt load and not enough income to cover.

2. Need to keep more Equity in your home if you Refinance your Mortgage

The maximum LTV for refinances changes from 95% to 90%. Many lenders had reduced this criterion independently over the course of the last year or so. It is designed to prevent mortgagors from “turning their houses into ATMs”. Again note that this only applies when you are REFINANCING your mortgage, NOT a new purchase, or a Mortgage Renewal.

3. More money needed as a down payment for Investment Properties

The maximum LTV for non-owner occupied houses is reduced to 80%. The intent here is to reduce the degree speculative buying that would be naturally encouraged with such low interest rates. This will affect investors that were using the CMHC insurance for rental properties to purchase either residential rental units, or purchasing homes for “flipping”, or speculating i.e. Condo buying. Furthermore, the government is only going to allow 50% of the rental income to be used to qualify the debt service ratios, so this will also make it tougher for this type of investor.

In Summary

It is estimated that these changes will only affect a very small percentage of the marketplace, and most experts agree will not have a signifigant impact on the HOT housing market in Canada. The spring market is just around the corner, and with the low inventories of homes for sale, and interest rates at all time lows, the coming months are going to prove to be a very exciting time for Real Estate Agents and Mortgage Brokers.

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