New Mortgage Rules Presentation 2010 pt 1
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Man 1: As you are all aware, there have been multiple changes that have taken place in the mortgage financing business over the last couple of weeks, and most of it has taken place this Monday, thus the reason for this seminar. From my point of view, these are probably the most changes in a very short period of time since I’ve been brokering, which has been 15 years now. We hope that this presentation will give you a better understanding of the changes, so that you can modify your business plans accordingly, if necessary.
We’re going to get started, and I think first up will be Maury. So, Maury, take it away.
Maury: Can everybody hear me without this? I think so. Right. OK, so what the is going on? Well, hopefully today we’ll try and address this question.
Today, what we’re going to cover is a quick intro of just making sure that we understand the high ratio and conventional, because that’s going to have set up explaining the changes, and making sure you know when the changes apply and don’t.
There is a set of government mandated changes that we’re going to be going over. That will be followed by the insurers have some changes that they’ll be setting up for some of their programs, specifically self employed and rental programs. That’s pretty much going to wrap it up, and we’re going to have questions at the end, but also, as we’re going through to try and make sure we cover each topic and it’s clear, if you have a question, please ask it when you have it.
Starting out here: The high ratio and conventional. By definition, when a deal is defined as high ratio, whenever there’s less than 20 percent down payment going into the deal. This is the same definition at all banks. When there’s less than 20 percent, the deal has to be insured. It can be insured by any one of the insurance companies we have in Canada. CMHT is, by far, the largest one used, but Genworth is second and there is also AIG.
So, the bank typically decides. The bank usually develops a relationship with one or two of the insurance companies, and they typically choose were the deal will best fit at the insurance company, but they’re all pretty much the same. The fees are the same. It’s pretty much blind to the client, for all intents and purposes, but there are three in the for the Data bank.
Conventional is where there is more than 20 percent in the deal. So, just two broad categories of the deal: High ratio and conventional.
We wanted to set that up because the government mandated changes, these apply to all deals at all banks and all insurance companies when there’s less than 20 percent down. The first change is there’s a new maximum amount someone could refinance their property to. We’ll go over that more in a second here. The second change is to help the banks. The insurance companies are going to determine the amount someone can qualify for, the amount of the mortgage. This is changing. And then, the third change is there is a new minimum down payment requirement for a non owner occupied rental property.
There is one common misconception that is commonly asked about the changes, which is a new minimum down payment… If someone’s going to live on the property, there’s no change to this. So, if someone’s going to buy a house and they’re going to live in it, there’s change. They can still buy with as little as five percent down.
So, the first change, the maximum refinance amount… The limit now is 90 percent. So, if someone has a house. They’ve had it for a while. Maybe they’ve done rentals. They want to take equity out. They can now only go to 90 percent of the property’s value at the time that they want to do it. Before, it was 95 percent they could go up to.
This was put in place to address some problems we’ve seen in the States more than Canada, where the market took property values up. People were refinancing every year, and they weren’t really doing anything to the property but treating their house like a bank account. It’s to discourage this. But, in Canada, this product was not really used. People were never really taking… They might have been refinancing, but they were never taking it up to the max, for the most part. 95 percent. A change, but probably something that won’t affect most people.
Duration : 0:10:0