New Mortgage Rules Eat Away Afforability

New Mortgage Rules Eat Away Afforability

The New Mortgage rules that have been changed from the Federal Gov’t is a game changer for affordability, especially for first time home buyers who have no equity to put towards their first home.  This new rule will really hurt single parents and anyone trying to get their first home.

In an eggshell if you have less than 20% down you will have to qualify for a mortgage at the Bank of Canada Posted rates which are about 4.64% instead of rates that range from 2.2 to 2.7% for a 5 year term.  That will really erode first time home buyers ability to qualify for the home that meets their needs.  Take a look at this comparison chart we have prepared.  It uses a mortgage rate of 2.7% before Oct. 17th compared to 4.6% after.    If you make $50,000 per year under the new mortgage rules you will qualify for $50,000 less of a home or maybe no home at all!

New Mortgage Rules

New Mortgage Rules Will Erode Buying Power.

With out a doubt this will affect the economy as more first time home buyers are forced out of the market.  They will have to continue to waste money on rent or continue to live with their parents.

The new mortgage rules will hurt first time home market which will also hurt the move up market as there are fewer buyers that are in the market to buy their homes so that they can sell and move up.

It will affect the economy as fewer new homes will need to be built, as the demand will not be there. So there will be more unemployment as plumbers, framers, electricians, sales people, real estate lawyers etc have less work.

There will also be fewer appliances, furniture, home decorating and improvement products sold.

With next to no notice that this rule was changing, it will really hurt new home builders and especially large condo projects who have homes under construction.

What can you do if you have been wanting to buy a home and you do not have the 20% down?

  •  You can find a home, and get it under contract with condition removal by October 17.
  • Save up until you have 20% down
  • Have a co-signer so that you can qualify for more money.

Will this affect foreign investors?  They probably have the 20% down, so not likely.

If you want to read the full article follow the link below.

Globe and Mail article

If you want us to help you find a home in a hurry please call we will be available to help you.

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A  Free Home Evaluation is a service we provide.

A Free Home Evaluation is a service we provide.

 

Similar to an annual wellness physical, a home evaluation can give homeowners a review of the financial elements of their home.

It’s particularly valuable based on the fact that their home and its equity is generally, one of their largest assets.  While a home evaluation is not an accredited appraisal, it can give you a good idea of what your home is worth.  As Chestermere, Langdon and Rockyview East specialists we have been in the homes that are on the market and that have recently sold.  So when we compare your home to another we have a much better idea of what the actual comparable was like.  There is no point in comparing your home to a smelly foreclosure, when your home is a well-kept home.

A home evaluation is also different than a property tax assessment.

A tax assessment takes a point in time and estimates the value from that date.  A home evaluation is what is it worth today!  In Chestermere, you can look up your tax assessment on line and see how it compares with your neighbours here.  Just log in as a visitor, agree to the terms, go to searches and find your street then type in your street number.  Your property will come up on the map.  just click on it and you will be able to see the reports.  You will want to check to see that the size is accurate and that any structures are correct.  You can also click on the homes near you to see how your home compares.

  • When we do a complementary home evaluation we will compare your home to similar properties recently sold and are currently available.
  • This can provide you with information  you can use to determine if you should  challenge a property tax assessment
  • You will know the value of your home so you can decide whether you have the equity to refinance so you can:
    • lower your rate
    • make improvements
    • remove a person from the loan
    • eliminate credit card debt
    • combine loans
    • take cash out of the equity
  • We can discuss which renovations and repairs will add value for resale.
We’d be happy to provide this information at no obligation as part of our on-going commitment to providing homeowner information, both in general and specifically, to our contacts. It is part of a long-term strategy whereby we hope to earn your loyalty and referrals when you do need our services to buy or sell.
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The Deposit on a Purchase Contract.

The Deposit on a Purchase Contract.

If I tell you it’s going to rain, you can put the buckets on the porch.” If you grew up in the south, you made have heard this expression when a person is testifying to the veracity of his word. If you know a person and/or their reputation, you know whether you can trust their word or not.

However, with a stranger such as a buyer, the seller doesn’t know whether they’ll live up to the terms of the contract or not.

Buyers submit deposit money along with a contract to demonstrate their commitment to the terms of the offer.

The more deposit that the buyer gives indicates to the seller a higher level of commitment to the contract. Except for stated conditions in the sales contract, if the buyer fails to close on the sale, the deposit may be forfeited. Significant deposit makes the seller feels more secure that the contract will close.

There certainly are a lot of things that can dictate how much deposit is appropriate. Local customs, price of the home and type of mortgage can all help to determine the proper amount. In some areas, it may be common for it to be 1-5 percent of the purchase price. In other areas, it might be a specific amount like $1,000 to $10,000 depending on the sales price. It really comes down to whatever the buyer and seller agree is the proper amount.

Another strategy is to put up an adequate amount initially until you get through the inspections or contingency period and then, to put up an additional amount when the conditions have been removed.

The deposit demonstrates the buyers’ sincerity in making the offer and proceeding according to the agreement so the seller can take their home off the market and start making plans to move and give possession of their home. Ultimately, both parties want to close as anticipated according to the contract and the deposit helps facilitate that.

In the Calgary area the deposit is held in trust by the seller’s real estate firm. When all conditions are removed the funds will be transferred to the seller’s lawyer.  If the conditions are not removed, providing the buyer has proceeded in good faith, then the deposit will be returned to the buyer.

There are options if you home has a conditional sale on it. You can have your realtor report the sale as sale pending, this allows buyers to still view the home, and they know that they will have to wait for the first sale to fall, or they can write a back-up offer.   It will still show up on the internet as for sale.  It is a good option if you are anxious about the ability of the buyer to complete the sale.

deposit

A deposit is usually required on an offer to purchase.

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