We had a recent call from a client who has owned his detached home for many years, is still working and is looking to make a change. Taking the precautionary step of wanting to find a new home first before selling his own, he was shocked to learn that his long time financial institution was not going to give him financing approval for a new home before he had sold his existing one. This in fact has been a quiet reality for some time and not pandemic related. Banks are not interested in lending on your equity unless it is a sure thing.
For retirees, the rule is even more harsh – regardless of investments they may have in addition to their home, banks will lend based only on income.
Looking at the other end of the spectrum – first time buyers, CMHC has just tightened the rules for eligibility requirements for insured mortgages and stress that there are no exceptions or loopholes.
Buyers with less than 20% downpayment must have mortgage insurance, which protects the lender. The downpayment cannot be borrowed or in any way increase the applicant’s indebtedness.
The gross debt service ratio (GDS), which is the buyer’s gross monthly income used for mortgage, taxes, heating and, in the case of condos & townhomes, half of the monthly maintenance fees can be no more than 35%.
The total debt service ratio can be no more than 42%.
Finally, the minimum credit score required for at least one borrower is 680 – an 80 point increase over the previous requirement.
If this is overwhelming and you want to check out how all of this affects you, we highly recommend consulting a knowledgable mortgage broker who can analyse your specific situation and advise accordingly. You need a firm preapproval commitment from a financial institution in order to be an efficient, successful house shopper.
We are happy to discuss your circumstances any time – especially with regard to navigating the new financial norms. Banks supply umbrellas only when not raining! Regardless of weather, we do have you covered and have the day to day experience to keep you covered.
We are Generations Real Estate Partners:- Michelle Hawthorne, Scott Johnson, Sheila Francis, Ray Harris and Shane Goutsis