The new mortgage rules effective today February 15th 2016 are as follows:
1.The maximum amortization schedule has been reduced to 25 years from 40 years
2. The minimum down payment must be at least 5 percent, however, if the home costs between 500K and 999K, one must add an additional 10 percent downpayment of the house price between 500k and 999k.
Therefore, a home costing 700k would require the following minimum downpayment:
A.700k x 5%= $35k
B.700k- 500k= 200k x10%= $ 20k
The new downpayment would have to be 55k in this example.
3. For non-owner occupied properties, a minimum of 20% downpayment is required.
4. Can borrow to a maximum of 80% of the value of home when refinancing a DROP from 95%.
5. The gross debt service ( GDS) ratio is now 39 % and the total debt service (TDS) is 44%.
GDS includes how much of the borrowers gross household income is needed to pay for home-related expenses ONLY , such a mortgage payments, property taxes and heating expenses.
TDS includes ALL DEBTS, both the GDS and TDS combined.
6. Government backed mortgage insurance is available only for homes under 1 million, therefore borrowers buying homes above 1 million require at least 20 percent down.
What does this potentially mean to you?
Because larger down payments and shorter amortizations are now required, some people who would have qualified for a mortgage before may not qualify now. as a result they may either have to postpone their purchase or buy a less expensive home.
LIVE WELL. INVEST INTELLIGENTLY.
25 February, 2016 Financial Planning Tax Planning