High Ratio mortgage rules are changing July 9th.
If your clients do not have 20% down payment this will effect them! Use this rule change to contact your data base and let them know what it means to them. It really is a now or never situation for a lot of borrowers. If your clients have an accepted offer and we secure financing prior to July 16th the old rules will apply.
Max amortization reduced to 25 years from 30 years
Max debt servicing ratio reduced to 39% from 44%
Max purchase price of $1,000,000
Clients with less than 20% down payment will no longer be able to purchase a house over $1,000,000.
Here's a few examples of what the rule change will do:
With the current rules it takes around $67,000 to qualify for a $500,000 purchase with 5% down payment. After July 16th the same client will need to earn $82,000 to qualify for the same puchase plus their payments will be $250 more per month.
With the current rules a client can purchase a $1,000,000 plus property with 5% down payment after July 16th this same client will need 20% down payment. On a $1,000,000 purchase that's an extra $150,000.
If interest rates increase these scenarios will only be amplified. For example if interest rates went to 4% and using the new rules the client who could purchase a $500,000 house right now with $67,000 income would need to have an income of $90,000.
Please feel free to call me to discuss this further.