- If you are planning on putting down less than 20% on the purchase of your new home then you are a getting a high ratio mortgage. On high ratio mortgages where a variable rate mortgage or a fixed rate mortgage of less than 5 years is chosen then the qualifying rate will be the Benchmark rate (set by the Bank of Canada and currently at 5.24%). In essence then, the client is having to qualify at a much higher rate than the one which they will be getting thus making qualification that much more difficult.
- If you were looking to get a mortgage of over $1m then you have to put down 20% of the purchase price. Keith Baker described this as “a game-changer for clients who, previously, could have qualified for a high ratio mortgage (based on income) where the mortgage amount exceeded $1,000,000”.
- High ratio mortgages must be amortized at no more than 25 years. Conventional mortgages can be amortized over 30 years.
- Where Lines of Credit are offered together with a mortgage component (HELOC) the Line of Credit portion may not exceed 65% of the value of the property.
- There are stricter guidelines for calculating the borrower’s minimum monthly payments on unsecured debt with the resultant effect making it more difficult to qualify.
- The elimination of cash-back down payment mortgages.
- Stricter proof of income for self-employed clients.
These new stricter guidelines mean that it is important to seek advice from a mortgage professional so that you can plan your home purchase in Canada. Our broker, Keith Baker, can be contacted here.