Q – My husband and I are young newlyweds, and we are in the process of starting to look for our first home. We were preapproved by my bank, but now the rules have changed. How will the new mortgage rules affect me? – June R., Niagara Falls, Ontario
A – The bottom line is that you will need to meet new guidelines to qualify for your home purchase if you purchase after the deadline of July 9, 2012.
As a typical first-time homebuyer in your late 20s or early 30s, you are most likely looking for homes priced in the $350,000 to $400,000 range. This means that to qualify for a government-backed insured mortgage, your payments will be limited to 39% of your gross personal income, and your total debt-service ratio will be capped at 44%. The maximum amortization period, or the length of time it would take to pay off the mortgage in full, has been lowered to 25 years from 30 years. A minimum down payment of 5% is required.
Shortening the maximum amortization period will force you to take on higher minimum payments, but it will also allow you to build up equity in your home faster and reduce the cost of the overall mortgage. If you have some concerns about qualifying under the new rules, speak to your bank or mortgage broker, or buy your home before the July 9 deadline. Happy house hunting! – R.T.
Robyn Thompson, CFP, is the founder of Castlemark Wealth Management, a boutique financial advisory firm, specializing in customized financial, investment, insurance, and retirement planning. Phone 416-828-7159 or email today to rthompson@castlemarkwealth.com for a no-obligation, no-charge Castlemark Integrity Financial Planning consultation.
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