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Elections & Changes For Canadian Home Buyers

With elections six months away, Canadian home buyers are hopeful for a solution to address the housing affordability issue and so are we. It’s undeniable that certain rule changes have made housing unaffordable for several home buyers across Canada, but these changes not only affect those trying to buy, they also affect Canadians who have been home owners for several years.

Often referred to as the “stress test”, home buyers and home owners are required to qualify for a mortgage on the greater of either: 2% above their contracted rate or the posted benchmark rate. This mortgage stress test drastically limits funds available to those trying to buy, refinance and even renew their homes. It is likely that our government will take action to hopefully make housing affordable again, we just don’t know how beneficial those changes will be to Canadians.

There are rumors of a proposed change that could cost Canadians an extra $40,000 of interest on the average $400,000 – here is our take on it.

Government Introduces a Real Blunder of a Program for Home Buyers’

Chilliwack, BC – Here are my thoughts regarding the governments offer of an interest free loan in exchange for a percentage of ownership in your home.

On January 17, 2017 the BC liberals introduced something similar called the BC Home Partnership Program. The program offered to match home buyers’ down-payment costs with an interest free loan for the first five years. When NDP took power back in March of 2018, they removed the program stating that,

            “When the program was first introduced, it was anticipated it would provide 42,000 loans over a three-year period, however, as of January 31, 2018, there were fewer than 3,000 loans approved.”

While the program sounded advantageous and enticing, popularity was minimal simply due to an unachievable list of requirements and restrictions. These restrictions filtered several prospective buyers wanting to part-take in the program. In addition, the return was not equivalent when comparing to the hoops Canadian home buyers needed to jump through. Furthermore, lenders reacted to the program by putting a repayment factor on the interest free loan that hindered the initial benefit of not having to make payments for the first five years.

Moving forward, I predict that we will have even fewer loans approved as the number of insured mortgages in addition to the CMHC incentive, would be capped using a formula (4X your annual income up to a max of $480,000). In simpler terms, Fraser Valley home buyers making $60,000 a year, would qualify for a $240,000 purchase (that really doesn’t get you a whole lot).

We’re not yet certain as to how this will be implemented, but if there is a repayment factor attached to the loan, it will have very little impact on helping Canadians get into the housing market.

At this point I would not be surprised if there is further action taken by CMHC, allowing for 30-year amortizations for those that have less than 20% down-payment. I personally think this is a terrible idea, sure your monthly payment might be a few dollars less, but it ultimately extends the life of the loan and increases interest over time.

Should they proceed with the extended amortization strategy, I would expect it to take place closer to elections in an attempt to try and leverage themselves.

If the government is concerned about helping Canadians get into the housing market, they should consider lowering the stress test rate.

For more information on the 2019 Federal Budget, visit: https://www.theglobeandmail.com/politics/article-federal-budget-2019-highlights-10-things-you-need-to-know/

Do you qualify to buy a home? Give our team to find out 604.615.1315

Refinancing? Don’t miss out

If you’ve considered refinancing your house for a renovation, debt consolidation or any other reason, now might be your last chance to qualify.

Earlier this year the Government of British Columbia implemented a new mortgage rule which required borrowers to qualify at 2% above the contract rate.

Example

Before new mortgage rule – Borrowers could qualify at the given contract rate: 3.59%

After new mortgage rule – Borrowers we’re required to qualify at 2% above the given contract rate: 3.59% + 2% = 5.59%

Almost all lenders followed suit and changed their lending guidelines so that borrowers had to abide by the new rule, known as the “stress test” or “B20”.

Up until this point, there were a very small handful of lenders that did not change their lending guidelines and continued allowing clients to qualify at the contract rate. This small pool of lenders has slowly dwindled down and one by one are now requiring clients to qualify under the new mortgage rule.

It has been brought to our attention the last lender that was not qualifying clients under the new “stress test”, will now be implementing the stress test to all borrowers in the new future.

Please call our team as soon as possible to discuss your options as it is unlikely we will receive any warning prior to the implementation of this rule change.

Important Update – Last Chance to Traditionally Qualify

With summer in full swing, we hope you are all enjoying the weather just as much as we are. Although our team has been remarkably busy, our families have managed to plan a getaway up to the cabin that we’re very much so looking forward to, especially considering the close call we encountered. Last year the forest fires burned their way right up to our front door on Green Lake, miraculously our cabin managed to survive.  It’s been 2 years since our last visit and to celebrate it’s survival, we plan on making this a trip to remember.

While this summer has been busier than usual, we believe it’s about to get even busier. Tomorrow, the Bank of Canada is going to make another rate announcement and if I was a betting man (which I am) I would say rates are going up. In addition to the rate increase, rumor has it ALL of our lenders will be applying the “Stress Test” within the next 90 days.

Earlier this year, the federal Government implemented a new policy which required lenders to qualify clients at 2% above their contract rate, this new rule reduces borrowing power as much as 20%.

Up until this point we were fortunate enough to have small group of lenders who were not required to follow these guidelines, which in return made it easier to qualify for a mortgage. Now there are rumblings that these two institutions will follow suit shortly and also abide by the new policy, ultimately decreasing the mortgage amount you’d qualify for. 

If you are considering any financing in the future you might want to to consider pushing that time line up to ensure you still qualify.