New Stress Test Rules – KNOW YOUR NUMBERS

Michael Hallett • Feb 19, 2020
We have yet another new borrowing guideline that the federal government is amending, this one is positive. Here is the list of the summarized details:

  • Comes into effect April 6, 2020.
  • Applies to borrowers seeking financing with less than 20% down payment for insured mortgages
  • Not just for first time homebuyers, but everyone with less than 20%.
  • Overall qualifying rate will be reduced by approx 30 basis points or 0.30% currently at 5.19%.
  • This change is being made to bring the qualifying rate more in-line with the housing market.

This amendment to the qualifying rate will increase borrowing power, but how much?

Scenario #1 – current guidelines for INSURED mortgage until April 5, 2020

  • $80,000 gross household income
  • No debt, credit score is 680 or greater
  • $40,000 down payment
  • 25 yr amortization
  • Qualifying rate issued by the Bank of Canada is 5.19%

Maximum purchase price is $400,000 with maximum borrowing power of $360,000.

Scenario #2 – guidelines for INSURED mortgage as of April 6, 2020

  • $80,000 gross household income
  • No debt, credit score is 680 or greater
  • $40,000 down payment
  • 25 yr amortization
  • Qualifying rate issued by the Bank of Canada is 5.19%

Maximum purchase price is $415,000 with maximum borrowing power of $375,000.

These 2 scenarios are specific to this set of numbers. If any of these numbers are different, then so too is the outcome; income is higher or lower, credit score is less, there is revolving debt or a different down payment amount.

To summarize, this modification will increase ones borrowing power approximately 3-5% more. It could be the small bump one needs to get into owning their own piece of real estate or upsizing from their current home.

As always, please do not hesitate to call, text (604-616-2266) or email (michael@hallettmortgage.com) me with any and all questions as it relates to the mortgage industry.

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Getting a Mortgage While on Parental Leave

By Michael Hallett • 01 May, 2024
Chances are if the title of this article piqued your interest enough to get you here, your family is probably growing. Congratulations! If you’ve thought now is the time to find a new property to accommodate your growing family, but you’re unsure how your parental leave will impact your ability to get a mortgage, you’ve come to the right place! Here’s how it works. When you work with an independent mortgage professional, it won’t be a problem to qualify your income on a mortgage application while on parental leave, as long as you have documentation proving that you have guaranteed employment when you return to work. A word of caution, if you walk into your local bank to look for a mortgage and you disclose that you’re currently collecting parental leave, there’s a chance they’ll only allow you to use that income to qualify. This reduction in income isn’t ideal because at 55% of your previous income up to $595/week, you won’t be eligible to borrow as much, limiting your options. The advantage of working with an independent mortgage professional is choice. You have a choice between lenders and mortgage products, including lenders who use 100% of your return-to-work income. To qualify, you’ll need an employment letter from your current employer that states the following: Your employer’s name preferably on the company letterhead Your position Your initial start date to ensure you’ve passed any probationary period Your scheduled return to work date Your guaranteed salary For a lender to feel confident about your ability to cover your mortgage payments, they want to see that you have a position waiting for you once your parental leave is over. You might also be required to provide a history of your income for the past couple of years, but that is typical of mortgage financing. Whether you intend to return to work after your parental leave is over or not, once the mortgage is in place, what you decide to do is entirely up to you. Mortgage qualification requires only that you have a position waiting for you. If you have any questions about this or anything else mortgage-related, please connect anytime. It would be a pleasure to work with you.

Bridge Financing and Deposit Lending

By Michael Hallett • 24 Apr, 2024
Let’s say you have a home that you’ve outgrown; it’s time to make a move to something better suited to your needs and lifestyle. You have no desire to keep two properties, so selling your existing home and moving into something new (to you) is the best idea. Ideally, when planning out how that looks, most people want to take possession of the new house before moving out of the old one. Not only does this make moving your stuff more manageable, but it also allows you to make the new home a little more “you” by painting or completing some minor renovations before moving in. But what if you need the money from the sale of your existing home to come up with the downpayment for your next home? This situation is where bridge financing comes in. Bridge financing allows you to bridge the financial gap between the firm sale of your current home and the purchase of your new home. Bridge financing allows you to access some of the equity in your existing property and use it for the downpayment on the property you are buying. So now let’s also say that it’s a very competitive housing market where you’re looking to buy. Chances are you’ll want to make the best offer you can and include a significant deposit. If you don’t have immediate access to the cash in your bank account, but you do have equity in your home, a deposit loan allows you to make a very strong offer when negotiating the terms of purchasing your new home. Now, to secure bridge financing and/or a deposit loan, you must have a firm sale on your existing home. If you don’t have a firm sale on your home, you won’t get the bridge financing or deposit loan because there is no concrete way for a lender to calculate how much equity you have available. A firm sale is the key to securing bridge financing and a deposit loan. So if you’d like to know more about bridge financing, deposit loans, or anything else mortgage-related, please connect anytime! It would be a pleasure to work with you.
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