Three new lending guidelines were recently released by the Federal Government. The guidelines are to be enforced effective April 19, 2010. Below is a list of the new rules along with an explanation:
1) All borrowers must meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term. – Currently, some lenders will allow you to qualify at the 3 and 4 year fixed rate terms when choosing a fixed rate mortgage term of less than 5 years. In addition, for variable rate mortgages some lenders will allow you to qualify at their best 3 year term fixed rate. The 3 year fixed rate is normally lower than a 5 year fixed rate. The lower qualifying rate allows you to qualify for a larger mortgage and thus a higher purchase price. Under the new rules, you will no longer be able to take advantage of the shorter terms and lower rates to qualify for a higher mortgage. For example, with an income of $50,000 per year, no other monthly debt and great credit, your current maximum purchase price would be approximately $400,000 with a 5% down payment. This maximum purchase price is based on the current 3 year qualifying rate with property taxes not to exceed $1,900/year and no condo fees. When the new rule takes effect, your maximum purchase price decreases to approximately $375,000 with 5% down payment. This maximum purchase price is based on the current 5 year qualifying rate with property taxes not to exceed $1,700/year and no condo fees. The $375,000 maximum purchase price is regardless of whether you choose a fixed, variable, or a term of 5 years or less.
2) The maximum amount one can withdraw in refinancing their mortgage will be reduced to 90% from the current 95% of the value of one's home. – This change allows you to borrow less upon refinancing your existing property. This means if your property is valued at $300,000, the maximum you could borrow today is $285,000 (95%). However, after the rule change takes effect your maximum borrowing power drops to $270,000 (90%). This change only applies to existing owner occupied properties for refinance purposes.
3) Non-owner occupied properties will require a minimum down payment of 20%. – Currently, you have the ability to purchase an investment/rental (non-owner occupied) property with as little as 5% down payment. After the changes take effect, 20% down payment will be required. This means if you were to purchase an investment/rental property valued at $300,000, currently your minimum down payment is $15,000 (5%). When the new rule takes effect, your minimum required down payment to purchase the same property will increase to $60,000 (20%).
We hope that you now have a little more knowledge about the new mortgage guideline changes. If you have any further questions about the above changes please feel free to contact us anytime.
We are now on Twitter. Click Here to start following us and be the first to receive daily updates about interest rates and mortgage news.
Any questions at all about mortgage financing please refer to our newly designed website at www.yourmortgagecontact.com or call us today. In addition please let your family and friends know about Your Mortgage Contact. We appreciate all referrals and everyone always receives personalized service. Please contact Betty at 403-532-3927, e-mail bsaskiw_prolink@telus.net, Kevin at 403-589-3021, kevsas@telus.net or at our updated website: www.yourmortgagecontact.com
Sincerely,
Betty Saskiw, AMP
Mortgage Associate
&
Kevin Saskiw, CFA
Mortgage Assistant
Monday, April 19, 2010
Wednesday, April 7, 2010
Housing Affordability Only to Get Worse
With the recent mortgage rate increases purchasing a home has become less affordable. What this means is that a house you could purchase a couple of months ago is unaffordable today. In addition the affordability erosion is due to the recent appreciation of house prices. This newsletter covers how you still have an opportunity to take advantage of the historically low rates.
Looking further into the future, home prices are predicted to continue to keep rising at a moderate pace. In addition, as the economy recovers future salaries are also expected to increase. The main factor that is going to affect future affordability is mortgage interest rates. The expectation is that interest rates will increase another 0.50% by the end of 2010 and 2.5% higher in total over the next 2 to 3 years. Even with the recent increase in the mortgage rates, the rates are still considered being at historical lows. These historically low mortgage rates mean it is still a great time to purchase or refinance your home. The following example shows how you may not be able to afford your home if you wait any longer. Also it proves there is still opportunity to save on interest choosing to purchase or refinance a home in the near term rather than waiting until next year:
Example: $300,000 mortgage amortized over 35 years
Scenario 1: Current 5 year fixed closed interest rate 4.29%
Payment $1,374.08
Interest paid for entire term $61,690.85
Principle balance at end of term $279,246.05
Remaining amortization 30 years
Scenario 2: Predicted 5 year fixed closed interest rate at the end of 2010 of 4.79%
Payment $1,465.23
Interest paid for entire term $69,029.74
Principle balance at end of term $281,115.94
Remaining amortization 30 Years
From the example above you can see how the payments have increased by $91.15. This may not seem like much but it can actually lower the maximum mortgage you can qualify for substantially. This could mean that dream house you were hoping for may now be unaffordable if you wait until the end of the year to purchase. Not only could you afford more with the lower interest rates but there are two other great benefits as follows: 1) Interest savings of $7,338.89 over the 5 year term. 2) Lower principal balance that will save thousands in future interest.
So if you are looking to purchase a home or were thinking about refinancing, do not wait! You may no longer have the ability to afford your dream home or take advantage of the interest savings, if you do not act soon. Please contact us today to take your first step to purchase your new home.
We are now on Twitter. Click Here to start following us and be the first to receive daily updates about interest rates and mortgage news.
Any questions at all about mortgage financing please refer to our newly designed website at www.yourmortgagecontact.com or call us today. In addition please let your family and friends know about Your Mortgage Contact. We appreciate all referrals and everyone always receives personalized service. Please contact Betty at 403-532-3927, e-mail bsaskiw_prolink@telus.net, Kevin at 403-589-3021, kevsas@telus.net or at our updated website: www.yourmortgagecontact.com
Sincerely,
Betty Saskiw, AMP
Mortgage Associate
&
Kevin Saskiw, CFA
Mortgage Assistant
Looking further into the future, home prices are predicted to continue to keep rising at a moderate pace. In addition, as the economy recovers future salaries are also expected to increase. The main factor that is going to affect future affordability is mortgage interest rates. The expectation is that interest rates will increase another 0.50% by the end of 2010 and 2.5% higher in total over the next 2 to 3 years. Even with the recent increase in the mortgage rates, the rates are still considered being at historical lows. These historically low mortgage rates mean it is still a great time to purchase or refinance your home. The following example shows how you may not be able to afford your home if you wait any longer. Also it proves there is still opportunity to save on interest choosing to purchase or refinance a home in the near term rather than waiting until next year:
Example: $300,000 mortgage amortized over 35 years
Scenario 1: Current 5 year fixed closed interest rate 4.29%
Payment $1,374.08
Interest paid for entire term $61,690.85
Principle balance at end of term $279,246.05
Remaining amortization 30 years
Scenario 2: Predicted 5 year fixed closed interest rate at the end of 2010 of 4.79%
Payment $1,465.23
Interest paid for entire term $69,029.74
Principle balance at end of term $281,115.94
Remaining amortization 30 Years
From the example above you can see how the payments have increased by $91.15. This may not seem like much but it can actually lower the maximum mortgage you can qualify for substantially. This could mean that dream house you were hoping for may now be unaffordable if you wait until the end of the year to purchase. Not only could you afford more with the lower interest rates but there are two other great benefits as follows: 1) Interest savings of $7,338.89 over the 5 year term. 2) Lower principal balance that will save thousands in future interest.
So if you are looking to purchase a home or were thinking about refinancing, do not wait! You may no longer have the ability to afford your dream home or take advantage of the interest savings, if you do not act soon. Please contact us today to take your first step to purchase your new home.
We are now on Twitter. Click Here to start following us and be the first to receive daily updates about interest rates and mortgage news.
Any questions at all about mortgage financing please refer to our newly designed website at www.yourmortgagecontact.com or call us today. In addition please let your family and friends know about Your Mortgage Contact. We appreciate all referrals and everyone always receives personalized service. Please contact Betty at 403-532-3927, e-mail bsaskiw_prolink@telus.net, Kevin at 403-589-3021, kevsas@telus.net or at our updated website: www.yourmortgagecontact.com
Sincerely,
Betty Saskiw, AMP
Mortgage Associate
&
Kevin Saskiw, CFA
Mortgage Assistant
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