Tag: CMHC

Why Average Homebuyers Will Have It Rough in 2018

Why Average Homebuyers Will Have It Rough in 2018

There are new guidelines for residential real estate sales starting January 1, 2018.

Guideline B-20 from the Office of the Superintendent of Financial Institutions (OSFI) was revised recently enforcing stricter rules for people wanting to buy a house with an uninsured mortgage.

Previously homeowners who had a 20% down payment were thought to be:

  • In a safe financial position — mortgages are accepted fairly conservatively by banks.
  • Financed without direct government backing (like Genworth or CMHC).

Office of the Superintendent of Financial Institutions is an independent agency of the Government of Canada reporting to the Minister of Finance created “to contribute to public confidence in the Canadian financial system,” and they aren’t happy with the current standards for getting an uninsured mortgage.

The revised Guideline B-20 basically says that houses with uninsured mortgages — a.k.a if you save 20% down on your house so you don’t have to pay CMHC fees — still have to go through CMHC or Genworth starting January 1, 2018.

This is also being called the uninsured stress test. This link will take you to a page that gives more details like:

“Guideline B-20 now requires the minimum qualifying rate for uninsured mortgages to be the greater of the five-year benchmark rate published by the Bank of Canada or the contractual mortgage rate +2%.”

But for the rest of us who kind of understand what that says, but not really, it means that more people will be declined by banks, and even borrowers who aren’t a risk to the banks will be approved for LESS and/or see their mortgage rates rise.

So, homebuyers who aren’t rich could be shut out of the housing market or forced to accept crappy home loans.

This is a HUGE change, and a big reason to buy before January 1.

Keep in mind that these laws are made to protect lenders from a spike in delinquencies if interest rates rise. It just sucks big time for an average buyer.

Here is a great example of bnn.ca:

A family with an annual income of $100,000 with a 20 percent down payment can currently afford a home worth $792,813 (based on a 2.64 percent mortgage rate and accounting for property tax and utility costs). If stress-tested to qualify at 4.64 percent, that same family would afford $146,579 less home.

While many professionals in the financial industry agree that this is the move that we need to make to avoid any mortgage crisis, it prevents many people from being able to buy and is likely to dampen the housing market in the new year.

If you’re looking to invest in a home in the near future, give me a call, or shoot me an email and let’s get this done before January 1st!

Scott Kurz

204-941-1771

scott.kurz@prestonmyre.com

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Amortization: What’s that again?

Amortization: What’s that again?

Apparently we learn about this in applied math. I don’t remember that, and in high school I was more concerned with how I was going to pay for poutine at lunch than how long I’m going to pay off the imaginary hundreds of thousands of dollars I didn’t have.

Amortization is the time it takes you to pay off your mortgage — the most common, and the maximum length (with CMHC), is 25 years.

If you pay over a 20% down payment then you don’t need to go through CMHC and different lenders may give you a longer amortization period.

The benefit of longer amortization period is that your monthly payments will be lower. However, you will be paying A LOT more interest.

Ratehub.com has a great graphic that shows how much more interest you pay from a 25-year amortization to a 30-year amortization.

Screen Shot 2017-04-19 at 9.27.56 PM

$100,000 WOAH!

Basically, try and go for the shortest amortization period that you can afford. Check in with your bank, credit union or lender to see if you can increase monthly payments down the road, or put lump sum payments to pay off your mortgage faster without penalties.

If you have any questions about mortgages, home buying and selling, or anything at all email me at scott.kurz@prestonmyre.com or call me at 204-941-1771.

 

 

The hidden costs in buying a home

The hidden costs in buying a home

So you have your 5% down and you are ready to start looking for a home.

If only it was that simple.

Let’s use $300,000 as the cost of the hypothetical house you are going to buy — which is the average cost of a home in Winnipeg. If you move just outside the city you can get a lot more for your dollar, but that’s for another post.

So, say you find a home and you have your $15,000 down payment. You would think that your mortgage would go down to $285,000, right?

Nope.

With 5% down on a $300,000 home your mortgage only goes down to $296, 400.

Umm only $3,600? Where did my other $11,400 go?

CMHC

That’s your mortgage insurance that you need to pay unless you have 20% down.

Ok, so whatever, I have to make a few extra payments. I can live with that.

But wait!

Lawyer fees

Did you know you need a lawyer to do your paperwork and do lawyer things so you can own your home?

That costs about $1,000.

Land transfer tax

Then your lawyer is going to tell you that you need to pay a land transfer tax, which is about $3,720 for a $300,000 home in Winnipeg.

Already you are at:

$15,000 +

$1,000 +

$3,720 =

$19,720

And you only have taken $3,600 off of your mortgage, and you have no furniture, or kitchen utensils and you have to use cardboard boxes as your plate, chair, table and bed.

(We are assuming a 5-year fixed mortgage rate with a 25-year amortization period here. If you don’t know what that means then I will cover it in the next few blog posts — stay tuned!)

And you think this sucks? There are costs to owning a home that you don’t even realize are a thing.

These costs vary depending on the area of live in, what temperature you like your home, how efficient your windows and heating system are, and how much water you use etc..

But be prepared to pay house insurance (different than mortgage insurance), property taxes, hydro and water bills. Along with your normal grocery bills, cell phone bill, car insurance, Netflix, and whatever other bills you pay.

There is an incredible site called ratehub where you can type in the asking price of a home and select your bank, down payment, amortization period and all that stuff and it will tell you how much your mortgage will be, your land transfer tax, your mortgage payments and all that fun stuff. I highly suggest you check it out if you are thinking about buying a home.

Don’t let all of this scare you. Buying a home is a great investment for your future, but it’s a big commitment. When you are ready, call someone you trust to help walk you through it.

 

Buy your home before these 2 dates

Buy your home before these 2 dates

As a realtor, I would never tell you to rush your home purchase. As a friend, I’m telling you to get your butt in gear and start looking.

As of March 17, as in 10 days from now, CMHC (Canada Mortgage and Housing Corporation) is increasing their mortgage insurance premiums.

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The average cost of a detached house last year was $300,000, according to the Winnipeg Realtor’s Association. If you were to buy a house for that price after March 17, you are adding an extra $1,500 to your mortgage. That’s about $5 per monthly mortgage payment.

The good news is that your closing date can be after March 17, 2017, but you have to get your applications submitted to CMHC before that date to avoid the increase.

And on top of that, May 1, 2017 the dreaded growth fees come into affect. These growth fees, or impact fees, add about $500 per 100 square feet in some new residential areas.

That’s an added cost of $9000 to a 1,800 square foot new home! For those of you sitting on the fence about buying new, now is the time to act.

If you get your building permits in before the deadline you have a six-month grace period to avoid the fee. That gives you just under two-months to find the perfect new home and start the process. Just be aware that building new can be a long process. I have attached an infographic below to help explain the steps.

But, I have a theory.

These new fees are going to add an average cost of $10,000 dollars onto new home builds, and that might be enough to dissuade people from buying new homes.

If that’s the case, then more people will be looking into the resale market. I’m no economist, but I do know a little about supply and demand.

With a higher demand for resale homes and the supply staying the same, the prices in the resale market would be pushed higher.

Just something to think about!

You might be asking who I am and why you should trust me. I’m Scott Kurz and I have been selling homes for many years now. I am always learning new things, and I want to share those things with you. An informed homebuyer is a happy homeowner, and I want to help you along the way.

I’ll tell you a little more about me in my next couple of blog posts, but I felt I had to share this information now, since it’s a time sensitive matter.

If you have a question you want answered about real estate comment below and I will do my best to answer it.

Screen Shot 2017-03-07 at 12.03.24 AMHappy house hunting!