This month the average price for a detached home in Vancouver reached the $1 Million landmark.
According to the Vancouver’s real estate board
Local housing prices jumped 23 per cent in March compared to a year earlier.
Here’s more on Vancouver’s increasing home prices from the CTV National News … and from the Real Estate Board of Greater Vancouver
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We are in the news again! Derek Scott of the Canadian Press interviewed Mike regarding the New mortgage rules coming into effect on April 19th. The story – New rules for rental properties could squeeze first-time homebuyers - has been picked up by numerous newspapers, publications and blogs.
The focus of the interview was on how the new rules will make it more difficult to quality for a mortgage. In a nutshell … the old rules allowed 80% of rental income to be used when qualifying for a mortgage. The new rules have dropped the amount to 50%. Additionally, the rental income will not be allowed to offset the monthly mortgage payment, but will be added to one’s annual income. This means applicants must qualify for the total mortgage amount.
Here’s one version of the Canadian Press article.
How will this affect our customers? Depending on the number crunch, some people may not be able to make the transition from condo to house … even with the rental income.
However, we do urge you NOT to give up and assume you will not qualify. It really is a combination of your income, the rental income and the amount of your down payment. DO give us a call and let US do the number crunch for you. We will do our best to make it work under the new rules.
604-736-1855
Here is some interesting “Credit Score” information , just for Canadians: The Canadian Credit Repair Ebook
You can get Part 1 of the Ebook for free. Part Two … which is the part you REALLY NEED will cost you $20.00. It will save you a whole lot more than that, so it’s a pretty good investment.
How to read, analyze and dispute your Equifax credit report is a good article to read. It is American, but has information that pertains to your Canadian Credit Score.
Your Credit Score, Your Money & What’s at Stake By Liz Pulliam Weston
This is a great book to read BEFORE you need to use your credit score. It is American, but much of it applies to Canadians as well. If you are thinking about buying a home some time in the future, get your credit score right away and make sure it is squeaky clean before you need it.
IF you have, or think you might have a credit score challenge, get this book and start working on improving your Credit Score ASAP … it takes time to repair your credit score if you have a problem, so the sooner you start, the better.
Here is a synopsis of the chapters in the book.
1 – Why Your Credit Score Matters
2 – How Credit Scoring Works
3 – VantageScore – A Revolution or Just More of the Same?
4 – Improving Your Score – The Right Way
5 – Credit-Scoring Myths
6 – Coping with a Credit Crisis
7 – Rebuilding Your Score After a Credit Disaster
8 – Identify Theft and Your Credit
9 – Emergency! Fixing Your Credit Score Fast
10 – Insurance and Your Credit Score
11 – Keeping Your Score Healthy
You may request a FREE copy of your Personal Credit Report by mail.
Write to:
TransUnion of Canada, Inc.
Consumer Relations Centre
P.O. Box 338, LCD 1
Hamilton, ON CANADA
L8L 7W2
Equifax Canada Inc.
Consumer Relations
P.O. Box 190
Station Jean Talon
Montreal, Quebec CANADA
H1S 2Z2
The biggest challenge with the Free Reports is that you have to mail in a request and then wait for their reply which could takes weeks or longer. If you want your report faster you have the option of paying for an online report from Equifax
One of the first things that happens when you fill out a mortgage application is a request for your credit score. Your credit score is one of the things that are considered when a financial institution determines 1) whether or not you are eligible for a mortgage 2) what mortgage rate will be offered.
For example, your financial situation (down payment etc) may make you eligible for a mortgage, but your credit score may influence what rate (high or low) that you can get,
Here is an interesting article from the Financial Post explaining all about Credit Scores.
If you want to find out more about credit scores … visit the Equifax website. You can find information about how credit scores are obtained … and you can order your own credit score to see how you rank. The report will also tell you how to improve your score (IF it needs improving).
On April 19 the Canadian Government will implement three major rule changes to hopefully circumvent a housing-price bubble and keep homeowners from becoming overextended.
These new rules apply to government-backed, insured mortgages only.
1. 5-Year Fixed Qualification Rates
Borrowers will now need to qualify using a 5-year fixed rate regardless of what term they choose. If you want a 1.95% variable rate, for example, you will need to show that you can afford payments at a higher fixed rate such as 3.89% for 5 years.
The government is claiming that “This initiative will help Canadians prepare for higher interest rates in the future.”We couldn’t agree more. In fact we’ve been telling you to maximize your mortgage payments if you are paying down a low interest variable-rate mortgage. Unfortunately for some, It will now be harder to qualify for a variable-rate mortgage, but not much harder. Most lenders already use three or five-year mortgage rates to calculate a borrower’s debt servicing ratios. For example, it is expected that for many lenders, the qualifying rate will rise from its current 3.25% (for a 3 year term) to around 4%. Thus not a very large difference but will hurt those that are tight on those ratios.
2. 90% Maximum Refinancing
No longer will borrowers be able to refinance their homes to 95% of it’s value. 90% will be the new refinance maximum.
The Fed claims that “This will help ensure home ownership is a more effective way to save.“ Thus, borrowers will be less able to pay off high-interest debt with lower-cost mortgage money.
On the upside, this rule has the positive effect of keeping equity in the home (which is quite helpful when home prices fall). It also discourages homeowners from relying on home equity to bail themselves out like when they accumulate debt. We forsee problems forthose people who need to consolidate debt in an effort to pay more principal and less interest. On the other hand, a 90% refinance limit is an effective tool in that it deters people from racking up debt and using their homes as if it were an ATM machine.
3. 80% Maximum Insured Financing On Rental
Those buying non-owner occupied rental properties will need to put down 20% to get an insured mortgage, as opposed to the 5% down previously required. However, This rule does not apply to multi-unit owner-occupied homes with rental units such as duplexes, triplexes and basement suites (legal or not).
We believe this rule to be the one most often abused through fraudulent claims by an owner of an intent to occupy a dwelling; instead, the owner rents out the subject unit.
Undoubtedly there will be a rush of applications to beat the April 19th deadline. We expect a surge of calls and hopefully we’ll be able to meet the demand provided that lenders do not adopt the new rules early (prior to April 19th) as history has shown with the 40 year and zero down abolishment.
The good news is that the government says “Exceptions would be allowed after April 19th where they are needed to satisfy a binding purchase and sale, financing, or refinancing agreement entered into before April 19, 2010.”
We think the above rule changes are somewhat conservative in that the minimum purchase down payment requirement has not changed nor has the maximum amortization of 35 years (yet!). We’ll just have to wait and see what this does to our crazy Vancouver market. Our realtor referral sources are reporting constant multiple offer situation that are still driving prices above asking. Take a look at the most recent market report from our friends at Macdonald Realty.
Mike Averbach, AMP
Mortgage Planner
