Your Mortgage Questions Answered

THE VIEW FROM OAK PARK

The Official Krisztina Blogsite

Mortgage Questions seem to be on everyone’s mind these days as the government and CMHC (Canada Mortgage and Housing Corporation) implement various changes and consider others. So I will do my best to answer most of the questions I have been hearing.

Why are they taking away the 35-year amortization?

CMHC is capping mortgage lengths at 30 years in an effort to protect the housing market and maintain stability in the face of rising interest rates.

Can I still get a 35-year mortgage?

If you close your mortgage deal by March 17, 2011 you can still have a 35-year mortgage term. The by-law takes effect March 18, 2011.

I have a 35-year amortization. Is it protected?

Yes.

I’m on a Variable Rate Mortgage. Should I move to a 5-year Fixed Rate?

In light of rising interest rates, experts are suggesting a move to a 5-year Fixed so that you will know your mortgage costs for the next 5 years and not have any ‘surprises’. However research has shown that Variable Rate Mortgages outperform Fixed Rate Mortgages over the longer term. So I would suggest locking in for 5 years, and then reconsider at the end of that period.

I’m House Shopping. Is it in my interests to lock in a mortgage rate before I buy?

Yes. If the mortgage rate goes up, you are protected. If it goes down, you can re-qualify and benefit from the lower rate.

I’m a First-Time Buyer and want to use the 5% Down. Anything I should know?

Yes. CMHC has tightened the lending qualifications for this privilege. You MUST have impeccable credit. Make sure you check your own Credit Score to ensure you would qualify. I have seen deals pulled at the last minute by CMHC because credit scores were not as strong as assumed or as high as reported. The Buyers are then forced to look for a less expensive home or put down 10%. You should also know that there are rumours that the CMHC may eliminate the 5% Down Privilege altogether.

I’m Condo shopping. I heard some changes about Condo Fees in Mortgages. What’s up?

Although a date of implementation has not been set, they are considering making 100% (vs 50% currently) of your Condo Fees inclusive to the total amount of your mortgage. This may force some Buyers to look in a lower price range for their Condo.

Overall, you should always be thinking about affordability in the long-term. You don’t want to be house-poor. That is, you want to maintain your lifestyle and your discretionary income. So ask yourself this: if interest rates rise 1% can I still afford my house and my lifestyle? What about 2%?

If you’ve done the math, there won’t be any surprises. If you have any other mortgage questions, don’t hesitate to give me a call. If I don’t know the answer, I’ll find it!!

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