19 april 2010

Yesterday you could qualify for a $250,000 variable-rate mortgage with a 3.84% qualifying rate.

Today, you have to qualify with a 5.85% rate (it will rise to 6.10% on Wednesday).
These changes mean that if you want to be approved for the same variable or 1-4-year fixed mortgage, your income needs to be approximately 25% higher than yesterday!
As far as we know, the majority of the big banks are applying the new posted qualifying rate to all variable and 1-4-year fixed terms, regardless of LTV!  Many other lenders are only using it on high-ratio mortgages. It’s a good thing to consult with your mortgage broker for clarification of wider variety of lenders.
But if you’re interested in a 5-10-year FIXED mortgage, nothing changes. The qualification rate is still the same.

REFINANCES
Since today, insured refinances will be limited to 90% loan-to-value.

2ND HOMES
From now on second homes qualify for high-ratio insured financing only if they have not more than one unit.

RENTAL FINANCING
In order to get insured financing, people buying rental properties now have to put down 20% (instead of 5%).
Of course, you can put down less than 20%, but in this case you’ll need to use an uninsured lender. Many times it means you’ll pay higher interest rates.
In terms of qualifying, CMHC has released a clarification on how they’ll treat rental income.
In short:
•    Speaking about the subject property or owner-occupied property which generate rent:
o    50% of gross rent will be added to the borrower’s income
o    Property taxes and heat are excluded from TDS calculations.
•    What about non-owner occupied rental properties:
o    100% of net rental income will be added to the borrower’s gross income
o    The property taxes, mortgage payment, and heat are excluded from TDS calculations.
Some details about the net rental income:
o    A 2-year average of rents is necessary to establish net rental income
o    Net rental income is proven via the borrower’s T776 Statement of Real Estate Rentals, though lenders can use their own methods to validate rental income
o    Net rental income can be grossed up 15% if the borrower takes deductions for depreciation or amortization, or rental-related self-employed income.

Listen to Denys Derzhavets live, tomorrow, April 20 at 8:40am – RADIO+ AM1430 for clarification and explanation.