It seems that every year the Vancouver mortgage rates & rules change, sometimes for the good, and sometimes for the bad. On July 9th, 2012, the newest mortgage rules come into affect. On our last meeting, we discussed exactly this issue.
According to Aimal Pamir, a great vancouver mortgage agent, the rules change mainly impacts those of us looking to take advantage of low or no money down mortgages, or looking to cash in on the equity in our current homes.
First, if you have less than 20% for your down payment you will not be able to get a prime rate mortgage, and then amortize over a 30 year period. The new rule makes 25 years the maximum amortization period. This will make your payments more overall. I guess the idea is to encourage sound financial planning, and ensure you aren’t taking on more debt in the long term that you can’t afford short term, if Vancouver mortgage interest rates spike.
The second change is not just about Vancouver mortgage brokerage rates. A Mortgage broker in Vancouver says it used to be that we could get eighty five percent of our equity, called loan to value rate by the banks. With the new rules, we can only get eighty percent. While five percent may not seem like a big deal, on an expensive Vancouver property, this can be in the neighborhood of thousands of dollars.
Debt and Insurance
The other major changes are to mortgage insurance, and approving mortgages with certain Total Debt Service and Gross Debt Service.
The new rules say no more mortgage insurance on properties over a million dollars in value. Vancouver Mortgage insurance is in place to protect lenders against a default. If a property worth more than a million is insured, the risk involved becomes too great. A million dollar mortgage is going to be high payments, and sometimes life happens. The CMHC no longer wants that kind of risk on their books.
The other major change isn’t perceived as negatively as the others. Lenders typically approve mortgages using the Gross Debt Service, which is the financial ability to pay for housing and its associated costs, and the Total Debt Service, which is the ability to pay all monthly debts. Yay for everyone involved, the amounts are moving from 32% to 39% for the GDS, and from 40% to 44% for the TDS.
The impact of these changes will be interesting.
Here is also a video on a vancouver mortgage agent on grow operations: