Hybrid Mortgages in Canada

No, it is not fancy name. There is such thing called hybrid Mortgages in Canada. The trend is picking up and intends to continue. Canadians are doing more research and like to see their options before signing up for traditional mortgages.

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TD Canada Trust and CIBC are raising some of their fixed-term rates by as much as one-quarter of a percentage as of February 8th, 2011. Both TD Canada Trust and CIBC are raising their five-year mortgage, one of the most commonly chosen by homeowners, to 5.44 per cent.

A quarter point increases on a $300K mortgage will add around $75 a month to on mortgage payments. It is still a great time for Professional Real Estate Investors or home buyers or for those who own a home looking for a better interest rate then what they had.says Navtaj Chandhoke, founder of Professional Real Estate Investors Group (PREIG) Canada and World Wealth Builders.

The rate for TD's five-year special closed fixed rate also increased by 25 basis points, and will now be 4.39%.

The increase marks the first mortgage rate hike since federal Finance Minister Jim Flaherty announced changes to Canada's mortgage rules last month. As part of those changes, the maximum amortization period for a mortgage was lowered from 35 years to 30 years. As well, the refinancing limit of a homes value was changed from 90% to 85%.
The changes marked the second time Canada's mortgage rules had been adjusted within the span of a year. Prior to last years changes, amortization periods in Canada were as lengthy as 40 years.

The banks other fixed rates are also headed higher.

The other banks are expected to follow TD Canada Trust and CIBC lead soon.  The Big 5 last raised rates around December 15, but at that time they left posted rates as is. If the other banks match this new 5.44% posted rate, that means the qualification rate will likely rise on Monday by Bank of Canada.

CMHC will implement the following new measures to all applications for mortgage loan insurance:

Effective March 18, 2011:

• Reduce the maximum amortization period from 35 to 30 years for new insured mortgages with loan-to-value ratios of more than 80 per cent.
• Lower the maximum amount Canadians can borrow when refinancing a 1 - 4 unit owner-occupied property from 90 to 85 percent of the value of their homes.

Effective April 18, 2011:

• Mortgage loan insurance will no longer be available for non-amortizing secured home equity lines of credit, or HELOC.

I already have an insured mortgage. How will these changes affect me?

CMHC mortgage insurance is good for the life of the mortgage. Borrowers renewing an insured mortgage will not be affected by these changes. For example, if a borrower had a 40 year amortization and there are 37 years remaining on the mortgage, the mortgage can be renewed with a 37 year amortization, as long as no new funds are being added to the mortgage.

Will a purchase and sale agreement dated prior to March 18, 2011 be considered binding if there are outstanding conditions that have not been fulfilled prior to March 18?

Yes, if the date on the purchase and sale agreement is earlier than March 18, the new parameters will not apply, even if the conditions of the agreement have not been waived.

I have a written mortgage pre-approval from a lender, dated before March 18, 2011 with a 35 year amortization. Will I still be eligible for a 35 year amortization if I don't sign an agreement of purchase and sale until March 18 or later?

No, a mortgage pre-approval is not considered to be a "binding agreement". You may have a 35 year amortization only if your agreement of purchase and sale is dated before March 18, 2011.

If I sell my current home and buy another, will the new parameters apply if I transfer the outstanding balance of my CMHC-insured mortgage to the new home?

As long as the outstanding balance of the insured loan, the loan-to-value ratio and the remainder of the amortization period are not increased, the new parameters will not apply when the CMHC mortgage insurance is transferred from one home to another.

Is it only new Home Equity Lines of Credit (HELOCs) that are affected by the new parameters or existing HELOCs as well?

As of April 18, 2011, CMHC will no longer offer mortgage loan insurance on non-amortizing lines of credit to approved lenders, such as HELOCs. However, if a HELOC is already CMHC insured then it remains insured for the life of the mortgage.

 Creative financing will be the key for Professional Real Estate investors, since the Canadian Mortgage rules are tightening up says Navtaj Chandhoke, founder of Professional Real Estate Investors Group (PREIG) Canada.

Toronto | www.WorldWealthBuilders.com |

"Securing a mortgage deal can take a bit of work and planning. There are three main factors when you are self employed Canadian. The process can be more complex but once you understand it, it is quite simple. Credit history, proof of more than 35% of down payment and notice of assessment from past 3years is must. There are other options but they will be lot more expensive" says Navtaj Chandhoke, founder, Professional Real Estate investors group (PREIG) Canada.

A good credit report and credit score are important factors in determining whether or not you will be approved for a mortgage. This is one of the factors mortgage professionals consider in qualifying you for a mortgage. The lender requires excellent beacon score possibly above 680 or more.

Most of the Canadian lenders will require mortgage loan insurance unless you can put down a down payment of more than 35 per cent. Insurers also recommend that lenders demand higher credit scores from borrowers stating their own incomes.

The simplest way for the self-employed to qualify for a mortgage is for the lender to look at your income on the Canada Revenue Agency notice of assessment for the past two years and see if you qualify for a mortgage.

Insurers such as Canada Mortgage and Housing Corp. (CMHC) will allow self-employed individuals to increase the income on their notice of assessment by 15 per cent in order to qualify for a mortgage. This is a generally accepted increase to compensate for noncash items such as business use of the home.

For full details, visit their website at CMHC -schl.gc.ca/en/hoficlincl/moloin/hopr/upload/CMHC-Self-Employed.pdf.

CMHC will average your income from the past two years, but if your income has been rising each year for the past four years or more, they will use the most recent year for their calculations. However, in order to take advantage of certain tax strategies, many self-employed individuals may keep money in their business rather than generating income.

If you're unable to qualify based on your verifiable income, you can still obtain insured mortgage finance, but CMHC will charge you a higher premium. Since April, CMHC permits you to state your own income if you have been in business for less than three years.

Most of the Canadian lenders will require mortgage loan insurance unless you can put down a down payment of more than 35 per cent. Insurers also recommend that lenders demand higher credit scores from borrowers stating their own incomes.

World Wealth Builders (WWB) conveys action-orientated Canadian Real Estate investors education, coaching and mentoring. WWB provide wealth creating secrets, strategies & step-by-step practical how-to methods. www.WorldWealthBuilders.com