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Summary of Mortgage Rule Changes
Happy New Year !
I wanted to take this opportunity to say thank you for your business and your help in making 2016 a successful year.Your supportmeans the world to me. I look forward to 2017 being another great year of helping people find their perfect mortgages!
As I am sure you are aware, there were a lot of unexpected mortgage policy changes in 2016.I am going to do my best to keep you up to date in 2017 with regular postings regardingpolicy, product and market changes that may impact you. You can find these updates on my facebook page, website, twitter and my blog. Please see links below.
With all these rule changes it is more important than ever to ensure you have someone experienced working for you! Let me put my 20+ years to work for you!
Below is a summary of the changes that came into effect in 2016.I havealso included some valuable information regarding the recently announced B.C. Home Owner Mortgage and Equity Partnership program, also known as theFirst Time Home Buyers Interest Free Loan program. There are still a number of questions to be answered regarding this program and I will keep you updated as we get the most recent news.
Summary of the New Rules and Down Payment Program
On October 17th, new housing policies came into effect and have left many Canadians unsureabout how these have impacted them. Outlined below is a very clear and concise summation of howyou have been affected.
How do the changes affect you?
High Ratio Mortgages
For home buyers with less than 20% down payment, mortgage qualification will be based on the Bank of Canada posted rate. This is to stress test borrowers, as Bank of Canada rates are higher than the rates offered by banks and lenders.
Low Ratio Mortgages
All remains the same for home buyers with a down payment of 20% or more. Specifically, borrowers with down payments of 20% or more will still be able to qualify for mortgages using the contract rate - unless the mortgage has a term of 4 years or less and/or is a variable rate mortgage, which are subject to the new Mortgage Qualifying Rate.
Understanding Key Mortgage Terms:
High Ratio Mortgage-A mortgage in which the borrower has a down payment of less than 20% of the purchase price.
Low Ratio Mortgage-A mortgage in which the borrower has a down payment equivalent to 20% or more of the purchase price.
Mortgage Qualifying Rate-The Bank of Canada conventional 5 year fixed posted rate. On average, 2% higher than rates offered by lenders.
BC HOME Partnership Down Payment Program
Last week the BC government announced the Home Owner Mortgage and Equity (HOME) Partnership. This program will provide down payment assistance to home buyers with less than 20% down.
Through the B.C. HOME Partnership program, the province is helping first-time home buyers by contributing to the amount they have already saved for a down payment with a loan that is interest-free and payment-free for the first five years.
The brief details about the program are as follows:
The B.C. HOME Partnership program will meet the buyers contribution up to 5% of the homes purchase price, to a maximum purchase price of $750,000.
After 5 years, buyers can either repay their loan or enter into monthly payments at current interest rates.
Loans through the program must be paid off in 25 years - the same length as most mortgages.
The program is set to start on January 16, 2017.
To be eligible for the program, eligible first time buyers must meet the following conditions:
Have been a Canadian citizen or permanent resident for at least five years.
Have resided in British Columbia for at least one year immediately preceding the date of application.
Be a first-time buyer who has not owned an interest in a residence anywhere in the world at anytime.
Use the property as their principal residence for the first five years.
Purchase a home that has a purchase price of $750,000 or less (excluding taxes and fees).
Obtain a high-ratio insured first mortgage on the property for at least 80% of the purchase price. Down payment of 5-19%
Have a combined, gross household income of all individuals on title not exceeding $150,000.
Have saved a down payment amount at least equal to the loan amount for which the buyer applied.
The B.C. Government will start accepting applications for the Down Payment program on January 16, 2017.
If you have any questions regarding the mortgage rule changes, downpayment program or your situation in general, please call or email me anytime. I can answer all your questions about the process, run you through your options, and make sure you get expert advice.
Jacquie Claggett | Bayfield Mortgage Professionals | 604-302-1502 | email@example.com|http://www.valleymortgages.ca/
OSFI tightens mortgage rules Edit
The Office of the Superintendent of Financial Institutions Canada (OSFI) published the final version of Guideline B-20 Residential Mortgage Underwriting Practices and Procedures. The revised Guideline, which comes into effect on January 1, 2018, applies to all federally regulated financial institutions.
The changes to Guideline B-20 reinforce OSFIs expectation that federally regulated mortgage lenders remain vigilant in their mortgage underwriting practices. The final Guideline focuses on the minimum qualifying rate for uninsured mortgages, expectations around loan-to-value (LTV) frameworks and limits, and restrictions to transactions designed to circumvent those LTV limits.
OSFI is setting a new minimum qualifying rate, or stress test, for uninsured mortgages.
Guideline B-20 now requires the minimum qualifying rate for uninsured mortgages to be the greater of the five-year benchmark rate published by the Bank of Canada or the contractual mortgage rate +2%.
OSFI is requiring lenders to enhance their loan-to-value (LTV) measurement and limits so they will be dynamic and responsive to risk.
Under the final Guideline, federally regulated financial institutions must establish and adhere to appropriate LTV ratio limits that are reflective of risk and are updated as housing markets and the economic environment evolve.
OSFI is placing restrictions on certain lending arrangements that are designed, or appear designed to circumvent LTV limits.
A federally regulated financial institution is prohibited from arranging with another lender a mortgage, or a combination of a mortgage and other lending products, in any form that circumvents the institutions maximum LTV ratio or other limits in its residential mortgage underwriting policy, or any requirements established by law.
To find out how this will affect you, please contact me at anytime.
Easy ways to keep more money in your pocket
It goes without saying that most of us would appreciate a little more money in our pockets. Believe it or not, its actually an achievable goal. In fact, a few simple tips can help you uncover meaningful savings each and every month. Need some ideas? Heres a little inspiration to get you started:
1. Pack food from home for lunches and snacks. Skip sandwich bags and opt for reusable containers, cutlery and drink bottle.
2. Switch light bulbs to CFLs. On average, it costs $250 a year in energy costs to light your home with incandescents. Save $150 by going with CFLs. Theyre more expensive initially, but will last 10 times longer.
3. Review and negotiate your service plansphone, internet, cable and television content.
4. Invest in topping up your insulation. Attic insulation can settle and compact over time, diminishing its original R-value and increasing heating/cooling costs. Topping it up with a quality batt insulation, like Roxul Comfortbatt, will immediately help improve the comfort of your home and reduce your monthly energy bills.
5. Pay off credit card debt and swap cards for lower interest rate options.
6. Install low-flow water fixtures to cut down on excess water consumption.
7. Lower your thermostat by two degrees in cold weather and increase it by two degrees in warmer weather.
8. Launder your clothes in cold water and at off-peak times.
9. Avoid impulse shopping. Stick to your list and avoid window shopping, which tends to draw buyers in.
10. Save money on entertainment by looking for free activities. For options in your area, try a simple internet search. You might be pleasantly surprised at the wide variety of activities and entertainment available for no or low cost.
Collectively employing the tips above could potentially add up to thousands in annual savings, proving that sometimes change can be a good thing.