100% Financing/40 year amortizations

Here’s something from Michael Ledingham, a local mortgage broker who is good enough to write something for me to post in my blog on occasion. Here is a brief overview on what the upcoming changes in CMHC policy in regards to 100% financing and 40 year amortizations means to you.

Ryan Coffey

Hey Ryan,

I thought I would write today to help clarify any misconception about the 100% financing/40 year amortization people have been talking about.  What is exactly happening and who does this affect?  Here goes…  What this pertains to is primarily  “A” business first mortgage purchase files that require high ratio insurance from the major insurers in the Canadian market place which are CMHC and Genworth.

In Canada, the Bank Act mandates that in order for a bank to go over 80% loan to value, the mortgage loan must be insured.  The insurer has their lending qualifications and so does the lender, so essentially a file must be qualified at two levels.  Due to a backlash from the financial crisis in the USA, the major insurers CMHC and Genworth will no longer be able to offer high ratio mortgage insurance on loans with an amortization of up to 40 years, and will no longer insure a loan up to 100% loan to value.  The cut off is to have live deal applications submitted by October 15th, although I think it would be wise to have it submitted by the 14th to avoid disappointments.

So we have covered what is happening…but who does this affect?  The loss of the 100% insured mortgage loan will affect people who had little or no money to put down for financing a new home, or people who wanted to use their money elsewhere.  This is “A” business that we are talking about….good provable income, and excellent credit history…but putting no money in from their own resources, for whatever reasons, other than closing costs.  The loss of the 40 year insured mortgage loan means that people who were very tight on qualifying on their provable income may now be excluded from the market range they were attempting to buy into.  The result is that they may have to put more of a down payment down, pay off some of their existing debts, or restrict their purchase to a lower price.

I have heard of many people saying that they still have 100% financing available….in a form, this is possible.  In the purest sense of what I have described above…no, it is not.  Next time, I will discuss other ways and means of achieving 100% financing.  Stay tuned!

Hope this helps,

Michael

( tag on logo for website )

Michael Ledingham – Licensed Mortgage Broker

Tel # 250-755-3014 Ext:224

TF # 1-877-750-3014

Fax # 250-755-1608

Email: m.ledingham@vericoselect.com # 101- 1801 Bowen Road,  Nanaimo B.C.  V9S 1H1

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