Possible rise in mortgage rates pitting couples against one another
Steve Ladurantaye and Carly Weeks From Saturday's Globe and Mail
When Rae Whitton started house shopping with Dan Madge last year, she agreed to a variable mortgage rate after their broker explained rates were likely to remain low until spring, at which point they could lock into a fixed rate.
But when February came and signs indicated the economy was getting stronger, anxiety kicked in. Ms. Whitton e-mailed Mr. Madge newspaper articles warning of possible mortgage rate hikes, and worried about worst-case scenarios, remembering how her parents paid up to 18 per cent on their mortgage.
“I was just freaking out. Not that I think it will ever be like that again, but what if this happens? What would we do?” she said. “You always think of the worst thing.”
With mortgage rates set to climb in coming months from historic lows, the emotionally charged decision to lock into a predictable fixed-rate mortgage or gamble on a variable rate that could change at any time is pitting couples against each other as they try to plan their future.
Call it the Battle of the Sexes: the Housing Boom Edition.
Ms. Whitton was terrified that rocketing rates would price them out of their new Toronto home and pushed for the certainty of a fixed-rate. Mr. Madge wanted to take a chance that rates would be lower.
“I didn’t like the uncertainty of it,” Ms. Whitton said. “I like knowing how much our payments are going to be every month.”
The conflict is based on fear of the unknown, and the fear of losing a home if circumstances spiral out of control.
A study commissioned by the Bank of Montreal indicated that women were more likely to be overwhelmed when buying a home than men, at 44 per cent versus 28 per cent. Men were also more likely – 39 per cent vs. 26 per cent – to take interest rates into account when deciding whether to buy.
“When it comes to a risky situation which usually involves some kind of uncertainty, women tend to perceive negative consequences to be more likely and perceive negative consequences to be more severe,” says Li-Jun Ji, a psychology professor at Queen’s University in Kingston, Ont., who studies how decisions are made.
After debating for several months, Ms. Whitton and Mr. Madge went to the bank a few weeks ago and locked into a three-year fixed-rate mortgage. And while Ms. Whitton said she knows more of their payment is now going to interest, she’s not going to let it get to her.
“I just try not to look at the statements,” she said.
Variable rate mortgages can be had for about 1.75 per cent right now, while a 5-year fixed-rated can be had for about 4.5 per cent. A homeowner can save thousands by choosing variable, but their monthly payments will get higher every time interest rates increase.
With the Bank of Canada expected to move its key lending rate higher in June, the variable rate will increase as well. And if history is any indication, rates go up a lot faster than they go down. From 1980 to mid-1981, rates gained 67 per cent, making many mortgages unaffordable.
There’s no sense that will happen this time, but even small increases can mess up a tight budget.
For example, a five-year variable rate mortgage at 2.25 per cent on $300,000 would carry a monthly payment of about $1,300, assuming a 25-year amortization period. A move to 5 per cent would boost the payment to $1,750.
It’s that kind of uncertainty women may be hardwired to avoid, said Lise Vesterlund, a professor at the University of Pittsburgh who has studied the role gender plays in financial decisions.
“My own work has shown that women are less confident about their decisions,” she said. “There are evolutionary reasons for that, and you can also argue there are circumstantial reasons as well.”
She said men are natural risk-takers - after all, there was a time when they could reproduce indiscriminately and not worry about consequences, while the women had to be prudent and think about the future.
That sense of risk is still fostered by parents today, she said, with the majority of boys playing games that have measurable results while girls are offered activities that have no discernible conclusion.
“From an evolutionary standpoint, men have always had more to gain by taking gambles,” she said. “Women tend not to get the same kick out of taking risks – part of the reason they like to lock in to something is they want to have more information about what their prospects will be like in the future.”
http://www.theglobeandmail.com/report-on-business/possible-rise-in-mortgage-rates-pitting-couples-against-one-another/article1545411/
Tuesday, April 27, 2010
Highlights of Benjamin Tal Weekly Market Insight
The Bank of Canada is very clear about its intention to raise rates as early as June. The key question is not
about timing but rather of magnitude. At this point, it appears that the market is in a process of pricing in a
significant rate increase by the Bank, with many observers suggesting that the Bank rate will reach 4% or 5%
by the end of 2011. It appears that the Bank of Canada itself is uncomfortable with this recent move by the
market to discount an aggressive tightening program. The Bank knows very well that this recovery is going to
be extremely non-linear with an array of factors limiting growth and inflation in the second half of the year and
into 2011. These factors include a strong dollar, the end of fiscal stimulus, a significant softening in real estate
activity following this spring, a slower pace of economic activity in the US in the second half, and the impact of
higher interest rates on over-extended consumers. In fact, our consumer capability index is at a 15-year low
and we estimate that consumers are now 40% more sensitive to higher rates compared to the last times the
Bank of Canada raised interest rates. This environment is consistent with a gradual approach towards removing
liquidity from the market with the Bank rate likely to rise to only 2.5%-3.0% by the end of 2011.
What does the coming rate hikes mean for the stock market? The common thinking is that higher rates are
negative for stocks, but history does not support this claim. Looking at data going back to the 1950s we found
that in the six months before the Bank started to lean into the wind, Canadian stocks historically provided, on
average, a 22% annualized return (dividends plus capital gains) measured by the total return index for the TSX
Composite. In the six months after a rate trough, Canadian stocks in comparison returned 8.3% in annualized
terms. That’s less, on average, than in the pre-hike period, but within a per cent of the TSX’s longer term
performance. Total returns were significantly negative in only one of the thirteen half-year periods after a rate
trough. Stocks outshone bonds, the main competing asset class, about 70% of the time in the half year before
the trough in rates and over 85% of the time in the half year after.
Along with the expected limited monetary tightening, this historical observation suggests that the coming rate
hikes may well be an annoyance but are unlikely to deliver a knockout blow to equity markets.
Benjamin Tal
CIBC Senior Economist
about timing but rather of magnitude. At this point, it appears that the market is in a process of pricing in a
significant rate increase by the Bank, with many observers suggesting that the Bank rate will reach 4% or 5%
by the end of 2011. It appears that the Bank of Canada itself is uncomfortable with this recent move by the
market to discount an aggressive tightening program. The Bank knows very well that this recovery is going to
be extremely non-linear with an array of factors limiting growth and inflation in the second half of the year and
into 2011. These factors include a strong dollar, the end of fiscal stimulus, a significant softening in real estate
activity following this spring, a slower pace of economic activity in the US in the second half, and the impact of
higher interest rates on over-extended consumers. In fact, our consumer capability index is at a 15-year low
and we estimate that consumers are now 40% more sensitive to higher rates compared to the last times the
Bank of Canada raised interest rates. This environment is consistent with a gradual approach towards removing
liquidity from the market with the Bank rate likely to rise to only 2.5%-3.0% by the end of 2011.
What does the coming rate hikes mean for the stock market? The common thinking is that higher rates are
negative for stocks, but history does not support this claim. Looking at data going back to the 1950s we found
that in the six months before the Bank started to lean into the wind, Canadian stocks historically provided, on
average, a 22% annualized return (dividends plus capital gains) measured by the total return index for the TSX
Composite. In the six months after a rate trough, Canadian stocks in comparison returned 8.3% in annualized
terms. That’s less, on average, than in the pre-hike period, but within a per cent of the TSX’s longer term
performance. Total returns were significantly negative in only one of the thirteen half-year periods after a rate
trough. Stocks outshone bonds, the main competing asset class, about 70% of the time in the half year before
the trough in rates and over 85% of the time in the half year after.
Along with the expected limited monetary tightening, this historical observation suggests that the coming rate
hikes may well be an annoyance but are unlikely to deliver a knockout blow to equity markets.
Benjamin Tal
CIBC Senior Economist
Mortgage Rates On the Rise Again
Mortgage rates on the rise again
Garry Marr, Financial Post
A new survey says more than four out of five home buyers feel comfortable with their debt, but another hike in interest rates might get Canadians squirming next time they're polled.
Canada and Mortgage and Housing Corp. surveyed 2,503 mortgage consumers between Feb. 11 and Feb. 28 and found 81% were comfortable with their current debt levels. However, the survey was done before three successive hikes in interest rates that have pushed the five-year, fixed-rate, closed mortgage from 5.25% to 6.25% in less than a month.
"Rates were low throughout most of the time [of the survey]," said Pierre Serré, CMHC vice-president of insurance products and business development, adding it was unclear whether the 81% figure might fall because of the hike.
Based on an average Canadian home-sale price of $340,920 in March and a 5% down payment, the minimum allowed, mortgage payments for a five-year, fixed-rate product have climbed almost 10%.
As it has throughout this rate-hike cycle, Royal Bank of Canada got the ball rolling Monday by adding another 15 basis points to its fixed-rate product. Toronto-Dominion Bank was next, with most of banks expected to follow shortly.
The hike means that a typical Canadian homeowner with a 25-year amortization with that $340,920 home and 5% down is now paying $2,120.54 per month in mortgage costs, up sharply from the $1,930.03 it was costing them before the latest hike in rates. The dramatic shift is likely once again to push people back toward a variable product linked to prime.
The same mortgage based on the current prime rate of 2.25% would cost only $1,410.84 to carry. Still, many economists predict the Bank of Canada will begin raising its rates as early as June, lifting the prime rate.
The survey also found homebuyers are relatively cautious when taking out their mortgages. Only 20% of them took out mortgages based on amortizations of longer than 25 years. CMHC also said 68% of consumers plan to pay off their mortgage sooner than current amortizations.
"In talking to some lenders I've heard of lots of people who get extended amortizations but accelerate their payments," Mr. Serré said.
The survey came out the same day as new statistics from Re/Max which show the high-end of the housing market continues to soar. Re/Max surveyed 13 markets in the first quarter and found records for high-end homes sales in nine of them.
Michael Polzler, executive vice-president of Re/Max Ontario-Atlantic Canada didn't think the latest hike in rates would do anything to slow the market. "It's still minor. Interest rates overall, as far as I'm concerned, are still at historic lows," he said. "Are they climbing up? Yes. It's time to consider locking in. Are they going to skyrocket? I don't think so."
Bernice Dunsby, Royal Bank's director of home equity, said the one percentage point rise in rates was not that large a leap on a historical basis.
"It has been widely anticipated that rates would be on the rise. The cost of funds just continues to raise," said Ms. Dunsby. "The thing our clients are looking for is options that provide additional rate protection."
She said customers have been opting for mortgage products that divide their debt in half, some of it going long and some of it going short. But the percentage of customers just going short continues to slide with variable rate products becoming less popular at Royal Bank.
Read more: http://www.financialpost.com/news-sectors/story.html?id=2952380#ixzz0mIZFfOdu
Garry Marr, Financial Post
A new survey says more than four out of five home buyers feel comfortable with their debt, but another hike in interest rates might get Canadians squirming next time they're polled.
Canada and Mortgage and Housing Corp. surveyed 2,503 mortgage consumers between Feb. 11 and Feb. 28 and found 81% were comfortable with their current debt levels. However, the survey was done before three successive hikes in interest rates that have pushed the five-year, fixed-rate, closed mortgage from 5.25% to 6.25% in less than a month.
"Rates were low throughout most of the time [of the survey]," said Pierre Serré, CMHC vice-president of insurance products and business development, adding it was unclear whether the 81% figure might fall because of the hike.
Based on an average Canadian home-sale price of $340,920 in March and a 5% down payment, the minimum allowed, mortgage payments for a five-year, fixed-rate product have climbed almost 10%.
As it has throughout this rate-hike cycle, Royal Bank of Canada got the ball rolling Monday by adding another 15 basis points to its fixed-rate product. Toronto-Dominion Bank was next, with most of banks expected to follow shortly.
The hike means that a typical Canadian homeowner with a 25-year amortization with that $340,920 home and 5% down is now paying $2,120.54 per month in mortgage costs, up sharply from the $1,930.03 it was costing them before the latest hike in rates. The dramatic shift is likely once again to push people back toward a variable product linked to prime.
The same mortgage based on the current prime rate of 2.25% would cost only $1,410.84 to carry. Still, many economists predict the Bank of Canada will begin raising its rates as early as June, lifting the prime rate.
The survey also found homebuyers are relatively cautious when taking out their mortgages. Only 20% of them took out mortgages based on amortizations of longer than 25 years. CMHC also said 68% of consumers plan to pay off their mortgage sooner than current amortizations.
"In talking to some lenders I've heard of lots of people who get extended amortizations but accelerate their payments," Mr. Serré said.
The survey came out the same day as new statistics from Re/Max which show the high-end of the housing market continues to soar. Re/Max surveyed 13 markets in the first quarter and found records for high-end homes sales in nine of them.
Michael Polzler, executive vice-president of Re/Max Ontario-Atlantic Canada didn't think the latest hike in rates would do anything to slow the market. "It's still minor. Interest rates overall, as far as I'm concerned, are still at historic lows," he said. "Are they climbing up? Yes. It's time to consider locking in. Are they going to skyrocket? I don't think so."
Bernice Dunsby, Royal Bank's director of home equity, said the one percentage point rise in rates was not that large a leap on a historical basis.
"It has been widely anticipated that rates would be on the rise. The cost of funds just continues to raise," said Ms. Dunsby. "The thing our clients are looking for is options that provide additional rate protection."
She said customers have been opting for mortgage products that divide their debt in half, some of it going long and some of it going short. But the percentage of customers just going short continues to slide with variable rate products becoming less popular at Royal Bank.
Read more: http://www.financialpost.com/news-sectors/story.html?id=2952380#ixzz0mIZFfOdu
Monday, April 26, 2010
RBC raises mortgage rates Again
RBC hikes mortgage rates again
Tavia Grant and Steve Ladurantaye
Globe and Mail Update Published on Monday, Apr. 26, 2010 12:14PM EDT Last updated on Monday, Apr. 26, 2010 12:34PM EDT
Royal Bank of Canada , the country’s largest bank, is leading the way on another round of mortgage-rate hikes, boosting borrowing costs Monday for the third time in recent weeks.
The rate on a five-year closed mortgage is now 6.25 per cent, an increase from the previous rate of 6.10 per cent. A one-year closed rate will, as of tomorrow, be priced at 3.80 per cent. All rates were increased by 15 basis points.
It’s the third move in a month as Canadian banks prepare for an era of rising interest rates . The Bank of Canada last week signalled that its key lending rate will rise, as early as June, as the economy recovers.
Banks can adjust the rate they charge, so customers could still pay a lower rate than what’s posted. Other banks tend to follow with rate hikes once one does, and the actual rate a customer pays depends on a variety of factors, including their financial situation, whether they use a mortgage broker, and how good they are at negotiating.
The hike comes the same day as Canada Mortgage and Housing Corp. released a study showing that 81 per cent of recent home buyers feel comfortable with their current level of debt.
Two thirds of the 2,500 people surveyed said there is a chance they will pay off their mortgage sooner than required, while 27 per cent said they have increased regular payments to eliminate their mortgage sooner.
Tavia Grant and Steve Ladurantaye
Globe and Mail Update Published on Monday, Apr. 26, 2010 12:14PM EDT Last updated on Monday, Apr. 26, 2010 12:34PM EDT
Royal Bank of Canada , the country’s largest bank, is leading the way on another round of mortgage-rate hikes, boosting borrowing costs Monday for the third time in recent weeks.
The rate on a five-year closed mortgage is now 6.25 per cent, an increase from the previous rate of 6.10 per cent. A one-year closed rate will, as of tomorrow, be priced at 3.80 per cent. All rates were increased by 15 basis points.
It’s the third move in a month as Canadian banks prepare for an era of rising interest rates . The Bank of Canada last week signalled that its key lending rate will rise, as early as June, as the economy recovers.
Banks can adjust the rate they charge, so customers could still pay a lower rate than what’s posted. Other banks tend to follow with rate hikes once one does, and the actual rate a customer pays depends on a variety of factors, including their financial situation, whether they use a mortgage broker, and how good they are at negotiating.
The hike comes the same day as Canada Mortgage and Housing Corp. released a study showing that 81 per cent of recent home buyers feel comfortable with their current level of debt.
Two thirds of the 2,500 people surveyed said there is a chance they will pay off their mortgage sooner than required, while 27 per cent said they have increased regular payments to eliminate their mortgage sooner.
Tuesday, April 13, 2010
If you were thinking of getting pre approved beter do it now!
if you were thinking of getting pre approved for a mortgage now is a could time to do it. With RBC raising rates today most lender will follow suit over the next couple of days.
RBC raises mortgage rate
Tara Perkins
Globe and Mail Update Published on Tuesday, Apr. 13, 2010 12:59PM EDT Last updated on Tuesday, Apr. 13, 2010 1:19PM EDT
Royal Bank of Canada (RY-T59.39-0.18-0.30%) , the country's largest bank, has raised mortgage rates again.
The move, which will result in a 0.25 percentage point increase in the cost of a number of fixed-rate mortgage products that the bank offers, is likely to spark another round of rate hikes among the country's mortgage lenders.
RBC kicked off one series of hikes a little more than two weeks ago, and most experts said that was the start of a steady rise in mortgage rates.
At that time the cost of a five-year closed rate mortgage from RBC and many of its competitors rose by 0.60 percentage points to 5.85 per cent.
More Discussions in our Globe Investor forums
Is this a good time to lock in or refinance your mortgage?
Started by: Roma Luciw
41 replies
Last post by chris_bullard
4/4/2010 5:22:08 PM
Tuesday's increase will raise the rate for a five-year mortgage from RBC further, to 6.10 per cent, effective Wednesday.
Royal Bank's Canadian mortgage portfolio amounted to about $148.5-billion in the latest quarter.
The banks say they are raising rates because their cost of funds is increasing.
Globe and Mail Update Published on Tuesday, Apr. 13, 2010 12:59PM EDT Last updated on Tuesday, Apr. 13, 2010 1:19PM EDT
Royal Bank of Canada (RY-T59.39-0.18-0.30%) , the country's largest bank, has raised mortgage rates again.
The move, which will result in a 0.25 percentage point increase in the cost of a number of fixed-rate mortgage products that the bank offers, is likely to spark another round of rate hikes among the country's mortgage lenders.
RBC kicked off one series of hikes a little more than two weeks ago, and most experts said that was the start of a steady rise in mortgage rates.
At that time the cost of a five-year closed rate mortgage from RBC and many of its competitors rose by 0.60 percentage points to 5.85 per cent.
More Discussions in our Globe Investor forums
Is this a good time to lock in or refinance your mortgage?
Started by: Roma Luciw
41 replies
Last post by chris_bullard
4/4/2010 5:22:08 PM
Tuesday's increase will raise the rate for a five-year mortgage from RBC further, to 6.10 per cent, effective Wednesday.
Royal Bank's Canadian mortgage portfolio amounted to about $148.5-billion in the latest quarter.
The banks say they are raising rates because their cost of funds is increasing.
Thursday, April 8, 2010
VAriable Rate Mortgages
Variable mortgages (almost) always win
Whether They're Taking On New Mortgages Or Renewing Ones They've Held For Years, Homeowners End Up Asking Themselves The Same Question: Should They Lock In Their Mortgage Or Should They Let It Float With A Variable Rate. Here, Toronto-Based Wealth Manager Scott Tomenson Makes The Case For Variable.
http://www.financialpost.com/magazine/story.html?id=2766742
ARE VARIABLE MORTGAGES AS GOOD AS THEY LOOK?
Q: My fiancé and I have just bought our first home and we are going in circles about what is the best mortgage for us before we close. We currently have a locked-in fixed rate with a bank of 3.98%, which we prefer to the uncertainty of taking a variable mortgage. But would we be better off with a variable-rate mortgage, especially if we saved money during periods when rate are low and use that to make payments on principal? Will that offset costs when our payments are higher than our current fixed rate? Getting Dizzy, Ontario
A: Historically, as far as interest rates are concerned, it is better to float your mortgage interest rate (i. e., choose a variable rate mortgage). This is a result of the "yield curve." The "normal" yield curve is positively sloped, with interest rates lower for short-term maturities (one to two years) and higher for longer-term maturities (five to 30 years). When the economy strengthens, the Bank of Canada will raise short-term interest rates (they only have control over short-term rates) and the base for variable-rate mortgages (usually the prime rate) is moved higher. This action signals a period of "tightening" of monetary policy to cool the economy and reduces inflationary pressures.
The vehicles that determine longer-term interest rates -- bonds -- tend to move according to inflationary expectations: If bond investors anticipate inflation (because of economic growth), they demand higher returns (interest rates) as protection from inflation. When the Bank of Canada is perceived as "fighting" inflation by raising short term interest rates, long-term rates have a tendency, in most cases, to remain stable or improve, because long-term bond investors are content that inflation will not grow.
In essence, while short-term interest rates may go up, they do so only until the Bank of Canada has slowed the economy enough to curb anticipated inflation. Then, as economic growth slows, the bank starts to lower them. The yield curve will flatten (with higher short-term interest rates) for a time, but when the economy slows, short-term rates will go back down and the yield curve returns to its "normal" positive slope.
Over this time, variable-rate mortgages will move up to being approximately equal to locked-in five-or 10-year rates, but that's followed by a period when they return to lower levels. More often than not, over this time, it is less costly to have held the variable rate debt. Exceptions to this situation would be times of hyper-inflation (like in the 1980s) when short-term interest rates went to extreme levels.
If you had a variable mortgage at prime minus over the past few years, as I did, it's been a great ride. I kept my payments level and the low interest rates allowed to me to pay off massive amounts of principal. True, the economy is strengthening and short term rates will go up a bit over the next couple of years, but I don't think it will be dramatic. The case for variable-rate mortgages remains strong.
Whether They're Taking On New Mortgages Or Renewing Ones They've Held For Years, Homeowners End Up Asking Themselves The Same Question: Should They Lock In Their Mortgage Or Should They Let It Float With A Variable Rate. Here, Toronto-Based Wealth Manager Scott Tomenson Makes The Case For Variable.
http://www.financialpost.com/magazine/story.html?id=2766742
ARE VARIABLE MORTGAGES AS GOOD AS THEY LOOK?
Q: My fiancé and I have just bought our first home and we are going in circles about what is the best mortgage for us before we close. We currently have a locked-in fixed rate with a bank of 3.98%, which we prefer to the uncertainty of taking a variable mortgage. But would we be better off with a variable-rate mortgage, especially if we saved money during periods when rate are low and use that to make payments on principal? Will that offset costs when our payments are higher than our current fixed rate? Getting Dizzy, Ontario
A: Historically, as far as interest rates are concerned, it is better to float your mortgage interest rate (i. e., choose a variable rate mortgage). This is a result of the "yield curve." The "normal" yield curve is positively sloped, with interest rates lower for short-term maturities (one to two years) and higher for longer-term maturities (five to 30 years). When the economy strengthens, the Bank of Canada will raise short-term interest rates (they only have control over short-term rates) and the base for variable-rate mortgages (usually the prime rate) is moved higher. This action signals a period of "tightening" of monetary policy to cool the economy and reduces inflationary pressures.
The vehicles that determine longer-term interest rates -- bonds -- tend to move according to inflationary expectations: If bond investors anticipate inflation (because of economic growth), they demand higher returns (interest rates) as protection from inflation. When the Bank of Canada is perceived as "fighting" inflation by raising short term interest rates, long-term rates have a tendency, in most cases, to remain stable or improve, because long-term bond investors are content that inflation will not grow.
In essence, while short-term interest rates may go up, they do so only until the Bank of Canada has slowed the economy enough to curb anticipated inflation. Then, as economic growth slows, the bank starts to lower them. The yield curve will flatten (with higher short-term interest rates) for a time, but when the economy slows, short-term rates will go back down and the yield curve returns to its "normal" positive slope.
Over this time, variable-rate mortgages will move up to being approximately equal to locked-in five-or 10-year rates, but that's followed by a period when they return to lower levels. More often than not, over this time, it is less costly to have held the variable rate debt. Exceptions to this situation would be times of hyper-inflation (like in the 1980s) when short-term interest rates went to extreme levels.
If you had a variable mortgage at prime minus over the past few years, as I did, it's been a great ride. I kept my payments level and the low interest rates allowed to me to pay off massive amounts of principal. True, the economy is strengthening and short term rates will go up a bit over the next couple of years, but I don't think it will be dramatic. The case for variable-rate mortgages remains strong.
Wednesday, April 7, 2010
Mortgage Changes in April
There are new mortgage lending rules that are taking effect April 9th and 19th. Here is an overview of the new policies:
Purchasing a Home
Any mortgage with less than 20% down payment and subject to mortgage insurance will be required to qualify at the 5 yr fixed rate. This is regardless if you select a variable or fixed rate for a shorter term or lower interest rate. The purpose of this change is to make sure that homebuyers will be able to afford their mortgage payments if interest rates rise in the future.
Home Refinancing
The amount that a home owner can withdraw from the value of their home is changing from 95% to 90%. For example, a home with a value of $300,000 the maximum amount will decrease from $285,000 at 95% to $270,000 at 90%
Investment Property(non owner Occupied)
The required down payment will increase from 5% to 20% of the purchase price.
Self Employed and 100% Commissioned Individuals
Under CMHC’s Self Employed No-income Qualifier program, a 10% down payment will be required for purchasing a home which is increasing from 5%. Home refinancing will be capped at 85% loan-to-value down from 90%.
If you have been self employed for less than 3 years or are a 100% commissioned, you can no longer qualify for financing under CMHC’s Self Employed NIQ. You will now be required to verify you income.
Purchasing a Home
Any mortgage with less than 20% down payment and subject to mortgage insurance will be required to qualify at the 5 yr fixed rate. This is regardless if you select a variable or fixed rate for a shorter term or lower interest rate. The purpose of this change is to make sure that homebuyers will be able to afford their mortgage payments if interest rates rise in the future.
Home Refinancing
The amount that a home owner can withdraw from the value of their home is changing from 95% to 90%. For example, a home with a value of $300,000 the maximum amount will decrease from $285,000 at 95% to $270,000 at 90%
Investment Property(non owner Occupied)
The required down payment will increase from 5% to 20% of the purchase price.
Self Employed and 100% Commissioned Individuals
Under CMHC’s Self Employed No-income Qualifier program, a 10% down payment will be required for purchasing a home which is increasing from 5%. Home refinancing will be capped at 85% loan-to-value down from 90%.
If you have been self employed for less than 3 years or are a 100% commissioned, you can no longer qualify for financing under CMHC’s Self Employed NIQ. You will now be required to verify you income.
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