The recent mortgage changes are still causing confusion with potential buyers/borrowers. The following are the most common questions provided by my mortgage consultant:
· Has the minimum equity requirement changed? It depends:
- No change for purchases: minimum equity remains at 5%
- Yes when refinancing: client requires 20% equity in property.
· Is the maximum amortization 25 years? It depends:
- High ratio mortgages (less than 20% equity): maximum amortization is 25 years;
- For conventional mortgages (minimum 20% equity): maximum amortization of 35 years is still available with a few prime lenders.
· Can I have a high ratio mortgage if the property purchase price is over $1 million?
- NO – for purchases over $1 million, the new rules state the minimum down payment must be 20%.
· I have a preapproval – does that mean I’m still ok under the old rules?
- NO – preapprovals based on the old guidelines are no longer valid. When arranging a final approval, it will be approved based on new guidelines.
If you have any concerns about how the changes impact your buyers, I can connect you to a qualified mortgage professional.
Although mortgage rates remain very low, it’s important to work with them on a long term strategy.