Invis - Richard Batke Mortgage Broker, Wilkins & Associates, Penticton BC - Richard's Blog

According to the 2010 Mortgage Consumer Survey from Canada Mortgage and Housing (CMHC) mortgage brokers continue to enjoy a 45% market share of all first time home buyers, 39% of all real estate buyers and show significant favour for refinances.

Mortgage Broker Use

Mortgage consumers included these benefits of using a mortgage broker:

  - They are able to get the best deal or rate for their
clients

  - They are convenient 

  - They offer time savings when obtaining a mortgage

The necessity of using a Mortgage Broker has
dramatically increased!

The mortgage lending landscape has changed so much recently, that you need to be intimately acquainted with each mortgage lender's policies.

For example:

The value of Rental Income

Most mortgage lenders do not value the rental income as they have in the past, drastically reducing the purchasing power of rental income.

For specific examples, see my previous blog entry: Rental Properties: How the new mortgage guidelines affect your buying power.

Today, there are very few lenders who will give you the full benefit from your rental income, and if you are shopping for yourself, the odds are that you not find the rental policy that you need.

Acceptable Income Types

Each lender has a list of income sources that they allow you to use as income. Some allow the use of Child Tax Benefits, some don't. Some allow Universal Child Care allowance, some don't. The list goes on.

Mortgage Qualification Criteria

Now most First Time Home Buyers will find themselves getting a 5 year fixed rate term as the savings and extra leverage of Variable rate Mortgages have been reserved for those buying a home less than they are qualified for and those with 20% down payment.

for specific examples, see First Time Home Buyer: Your Buying Power Has Changed

When you your purchasing power has been has been reduced, it is vitally important that you can make use of ALL your resources when qualifying for the home you want to buy.

If you have a lending institution who has the most conservative mortgage lending guidelines, they will decline your application.

If you use a Mortgage Broker, you will enjoy not only the best interest rates and mortgage products,
but you will get the maximum benefit from all of your specific resources!

I shop your mortgage to many different mortgage lenders including Chartered Banks, Credit Unions, "Mortgage Only" lenders and much more.

I have creative mortgage products including:

  - Home Equity Line of Credit
    (HELOC)

  - 50 / 50 Mortgage - combined variable
     and fixed rate mortgage

  - Re-advancable Mortgage - not a Line
     of Credit, though the funds can be
re-advanced

  - Simple fixed or variable
    rate mortgages

Richard Batke - Mortgage Broker

2004 Main St.
Penticton, BC
V2A 5H4

Direct: 250-809-0285
email: richardbatke@invis.ca
web: www.thehomefinancecentre.com
map: 2004 Main St., Penticton, BC

Richard Batke
Mortgage Broker

* Purchase * Refinance * Renewal * Debt Consolidation *
* Business Equipment Leasing *

Serving the South Okanagan, including:

Summerland BC | Penticton BC | Naramata BC | Okanagan Falls BC
Oliver BC | Osooyoos BC | Keremeos BC | Princeton BC

Rental Properties: How the new mortgage guidelines affect your buying power, by Richard Batke, Mortgage Broker, Penticton and Summerland BC

Purchasing Power and Rental Properties - How have the new mortgage lending guidelines in Canada affected you?

The Following comparison is using today's mortgage interest rates for all calculations.

Example 1: Non Owner Occupied Rental Property

Before April 19 Mortgage Lending Changes:

For Someone qualified to carry a mortgage payment of $1200/month for a rental property that has $1200/month income:

1. $237 900 purchase price with 5%
    down payment

2. $313 000 purchase price with 20%
    down payment

1. 5% down payment no longer available - 20% down payment minimum

2. $127 500 purchase price with 20% down for most lenders.

3. $313 000 purchase price for a select few lenders.

Summary:

CMHC is no longer participating in the non owner occupied rental market. This means that you must have a minimum of 20% down to invest in real estate.

It is also more important that ever for you to be aware of the lending policies of the many different mortgage lenders.

They can simply tell you that you are not qualified for your purchase because they are one of the vast majority of lenders that no longer allow you to get the maximum benefit from the income of your rental property.

Example 2: Owner Occupied Rental Property

Principal residence purchase with a self contained rental suite. This is also true for a duplex, triplex and fourplex.

Before April 19 Mortgage Lending Changes:

For Someone qualified to carry a mortgage payment of $1800/month:

1. $395 400 purchase price with 5% down
    payment

2. $531 600 purchase price with 5% down
    payment, $800/mo rental income from
    suite

3. $631 250 purchase price with 20% down
    payment, $800/mo rental income from
    suite

After April 19 Mortgage Lending Changes:

1. $395 400 purchase price with 5% down
payment

2. $421 000 purchase price with 5% down
payment, 800/mo rental income from
suite

3. $631 250 purchase price with 20% down
payment, 800/mo rental income from
suite

Summary:

For owner occupied rental properties, your purchasing power has been significantly reduced if you do not have a minimum 20% down payment. This does not negate the benefit you receive by using a rental suite to pay your mortgage down faster! We are evaluating purchasing power only.

In this example, there was over $110 000 reduction in your buying power!

Overall Summary:

The new mortgage lending guidelines are ensuring that those who have equity are the ones who enjoy the maximum leverage from their resources. You need to become one of them, and I can help you get there.

Furthermore, different mortgage lenders evaluate loan obligations differently, some allow child tax benefits and UCC as income, some don't. The days of simple mortgage underwriting are gone, so make sure that you have a well trained and experienced mortgage broker in your corner.

Whatever you do, do not limit yourself to 1 or 2 banks. In order to be sure that you are getting the best mortgage, you need to have access to many lenders. I have access to more than 80.

Now more than ever it is critically important to use the services of a Mortgage Broker who is not only experienced and intimately acquainted with the individual lender's policies but one who has access to the few lenders who will continue to offer the previous rental income model.

This is not an extraordinary change, it is returning to similar guidelines we have experienced in the past, though we can still have a minimum down payment of 5%, rather than the old policy of 20% from years gone by.

The real estate market will adjust to these changes and
the market will find its equilibrium once again.

Richard Batke - Mortgage Broker

2004 Main St. Penticton, BC V2A 5H4

Direct: 250-809-0285
email: richardbatke@invis.ca
web: www.richardbatke.com
blog: www.southokanaganmortgages.com
map: 2004 Main St., Penticton, BC

Richard Batke Mortgage Broker

* Purchase * Refinance * Renew * Debt Consolidation *
* Business Equipment Leasing *

Serving the South Okanagan, including:

Summerland BC | Penticton BC | Naramata BC | Okanagan Falls BC | Oliver BC
Osooyoos BC | Keremeos BC | Princeton BC

Buying power - How the new mortgage guidelines affect the First Time Home Buyer by Richard Batke, Mortgage Broker, Penticton and Summerland BC

The new mortgage lending guidelines are now in effect in Canada, here is how they affect First Time Home Buyers.

The Following comparison is using today's mortgage interest rates for all calculations.

Before April 19 Mortgage Lending Changes:

Someone qualified to carry a $1 500/month mortgage payment could purchase a home worth:

1. $394 200 with a 2 year term, Fixed
    Rate Mortgage

2. $365 500 with a 3 year term, Fixed
    Rate Mortgage

3. $365 500 with a Variable Rate
    Mortgage

4. $329 500 with a 5 Year Fixed Rate

1. $276 100 for all closed terms less than 5 years, including Variable
    Rate Mortgages

2. $329 500 with a 5 Year Fixed Rate

Purchase power reduction:  $39 000

Summary:

Granted 2 year terms for first time home buyers were not popular for many reasons, the variable rate mortgage was.  The reduction in this example from the 3 year term and variable rate mortgage is $36 000 as compared to the 5 year fixed rate mortgage.

As you can see, the new mortgage lending guidelines have effectively eliminated the variable rate mortgage and all mortgage terms less than 5 years as viable options for first time home buyers with less than 20% down payment.

Said another way, all first time home buyers with less than 20% down payment will likely use the 5 year fixed rate mortgage to finance their home, unless they buy a home that is worth less than the maximum amount they are qualified to buy.

This can be an excellent choice for some people, but that is a topic for another blog entry.

This is not an extraordinary change, it is returning to similar guidelines we have experienced in the past, though we can still have a minimum down payment of 5%, rather than the old policy of 20% from years gone by.

The real estate market will adjust accordingly, and settle down into business as usual.

Richard Batke - Mortgage Broker

2004 Main St. Penticton, BC V2A 5H4

Direct: 250-809-0285
email: richardbatke@invis.ca
web: www.richardbatke.com
blog: www.southokanaganmortgages.com
map: 2004 Main St., Penticton, BC

Richard Batke Mortgage Broker

* Purchase * Refinance * Renew * Debt Consolidation *
* Business Equipment Leasing *

Serving the South Okanagan, including:

Summerland BC | Penticton BC | Naramata BC | Okanagan Falls BC | Oliver BC
 Osooyoos BC | Keremeos BC | Princeton BC