Port Moody Real Estate News

As many of you know, there have been a multitude of changes recently announced by both the Government and the Insurers across different areas that will affect how we do our jobs.

1. Qualifying Rate Changes: Starting April 19th all High Ratio Mortgages qualifying for terms less than 5 years and all variable rate mortgages must use the 5 yr benchmark rate.
   
   Fixed Rate Mortgages and Variable Rate Mortgages: For loans with a fixed rate term of less than 5 years and for all variable rate mortgages, regardless of the term, the qualifying interest rate is the greater of the benchmark rate, and the contract interest rate. For loans with a fixed rate term of 5 years or more, the qualifying interest rate is the contract interest rate.
   
   Mortgages with Multiple Interest Rates (e.g. Multi-Component Mortgages): Each component must be qualified using the applicable criteria defined above.
   
   The "Benchmark rate" is the typical 5-year fixed posted rate of the Big 5 banks. That is 5.39% currently.
2. Rental/Revenue Property Changes: Starting April 19th, the max LTV for the purchase, porting or refinance of 1 to 4 unit non-owner occupied investment properties will be 80%. 2nd homes should still be OK, but CMHC will no longer insure 2nd homes with more than one unit. The borrower or his/her relative must live in the property "at some point during the year" and on a "rent-free" basis. Lenders must confirm that this will be the borrower's intention. Previously investors were able to finance up to 95%.
3. Refinance of Owner Occupied Property: Starting April 19, reduced to 90% of the value of the property, down from 95%.
4. Rental Debt Servicing Changes: CMHC is changing how rental income is used in a borrower's debt service calculations (TDS formula). Effective April 19, 50% of the gross rental income from the subject property and other revenue property may be added to the borrower's gross annual income for the purposes of calculating the borrower's TDSR. An 80% rental offset will no longer be used past April 19th. Keep in mind this applies to CMHC high ratio mortgages only. Here is an example to highlight the impact of this change:
5. CMHC BFS (Business for Self) Changes: The CMHC Self Employed without Traditional Third Party Income is intended for self employed borrowers who cannot confirm income via a 2 year NOA average. Typically, these are borrowers who are newly self employed (and have 2 years experience in the same line of work) and are the target sector of CMHC's BFS program. Starting April 9th 2010, the following changes will apply to stated income (BFS) applications with CMHC:
   • for purchase transactions, max LTV is being reduced from 95% to 90%
   • for refinance applications, max LTV is being reduced from 90% to 85%
   • Borrowers who have been BFS for more than 3 years will no longer be eligible for this program; these borrowers need to income qualify via a 2 yr average
   • 100% commission borrowers are no longer eligible for this program; these borrowers need to income qualify via a 2 yr average
   • if the borrower has other income not related to their business, that income is eligible to be included as longer as it can be substantiated