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Mortgage Changes - In effect July 9th

~Mortgage Changes - Effective July 9, 2012~

As you may have heard, the Government today "tightened" the rules for mortgages. The Federal Government announced this morning four new restrictions on insured mortgages effective Monday, July 9th, 2012.

These changes include:

  • Reducing the maximum amortization period to 25 years from 30 years.
  • Reducing the maximum amount of equity homeowners can take out of their homes when refinancing to 80% from the current 85%.
  • Limiting the availability of government-backed mortgages to homes with a purchase price of less than $1 million.
  • Fixing the maximum gross debt service ratio at 39% and the maximum total debt service ratio at 44%.


What does this mean to you - Qualification will become a bit more difficult. You may qualify for a bit less, and payments will be slightly higher.

Example - a purchase of $350,000 at today's interest rates would cost a buyer $1,457. After the shortened amortization those payments will go up to $1,635 (both without taxes).

Qualification: Before July 9th, buyers can get in with a family income of about $60,000 and after July 9th, this will go up to $67.000.
Note: this is ballpark, a high credit score client may get in with a bit less income.

On a positive note the 5% down payment rule remains intact.
Let me know if you have more questions.

Tibor Bogdan

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What is a pre-sale?

Example scenario: When the developer intends to build an apartment building and applies for financing, the bank will grant financing under certain conditions. One of them will likely be a certain percentage of pre-sales the developer will need to secure before receiving the funds.
It is common practice for a developer to approach several real estate investors and offer them an opportunity to purchase units of the non-existent building at a discounted price, and on good terms.

Once the number of pre-sales is accomplished, the developer goes ahead with the construction, which will likely take two years or longer to complete. During construction, their marketing team offers the remainder of the units for sale at market value to the public.

If you are a RE investor, you know that it is preferable to be buying at the pre-sale prices, not market value prices.

The question is, how do you get the invitation to buy a pre-sale?
In the past many years, investors have made substantial income by buying at wholesale prices and selling at retail prices even before they needed to complete their purchase. I saw many of them lining up and sometimes even camping overnight in front of the sales center to get a chance to buy at lower prices, but not everyone was lucky enough. You needed to be well-connected to get an opportunity, and you had to act fast.

Today is a bit of a different story. Several projects in the Lower Mainland and Fraser Valley offer really good prices and incentives to secure a unit now and complete the purchase two or three years later. The list of incentives varies from one project to the next. Besides attractive prices, you can get low deposit amounts (5-15%), low or no assignment fees, free updates, a mortgage rate buy-down program, extra parking and more.

A month ago, I helped a few of my clients purchase a presale in Surrey that sold out in 2 days, and I know of another good developer that will be offering a few units for sale as well.

If you would like to know more about these opportunities, I would encourage you to call or email me, and I’ll be happy to send you details on those projects.
 
Kind regards,
 
Tibor Bogdan
Century 21 Creekside Realty Ltd.
45428 Luckakuck Way #190, Chilliwack, BC V2R 3S9
cell: 604-855-2521
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