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Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
If you have questions about this, please email help@theknot.com.
Thank you.
Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
Has anyone read the new rules for mortgages?
Do you think this will affect you? I took a gander and I can't see it having any impact on us at all. We avoided CMHC altogether when we put 25% down on the house and financed the rest with a revolving line of credit instead of a traditional mortgage. I understand the purpose of the new "rules" but, in my experience, if someone has bad spending habits and a tendancy to be financially irresponsible (ie. borrow more than they can afford) then they are going to find a way to do it regardless of safeguards.
Thoughts?
Re: Has anyone read the new rules for mortgages?
I agree with you. Even though I am glad they are making some small (very small) steps in preventing people from becoming over-extended financially I think they haven't even scratched the surface yet. How about reducing the amount people get qualified for? When FH went to get pre-qualified we were approved for 5 times the amount of our yearly income!! We went with a house that is more in line of 2.5 time our yearly income. I told the mortgage specialist there was no way we could afford to buy a house for that much. I have tonnes of friends who bought houses for the maximum amount of money the bank would lend to them, which is quite easy here in Edmonton, and now they are debt up to their eyeballs. They wonder why am I struggling so much if the bank said I could afford it? I worry for those people, but they are still the ones going out for dinner every other day and taking tropical vacations once or twice a year. Your right, if someone has bad money management skills this will not prevent them from getting further in the hole.
When we bought, we had a number in mind of how high we wanted to go. We were preapproved for almost 30k more than that number. However we also knew that we were planning on more children, meaning time off work for me, plus we have a car loan at the moment.
We locked in at a great rate and we know that our payments will go up at the 5 year renewal. But we can also cut out extras if we have to. We do watch our money closer, but there are always things you can do without.
And I do agree that its greed and jealousy that gets people into a bad situation. You want to be like the neighbours, or family members, even though you make 20k less than them a year. People just need to get their priorities straight.
The summary I read seems like a good start:
1. All borrowers will have to be able to demonstrate that they could make the payments on a five-year fixed rate mortgage even if they end up choosing a mortgage, such as a variable rate mortgage, that would result in smaller monthly payments.
2. The maximum amount consumers can borrow to refinance their mortgages is being lowered to 90 per cent of the value of the home, down from 95 per cent.
3. Anyone who wants a government-insured mortgage to buy a home that they will not live in will have to come up with a down payment of 20 per cent, up from five per cent.
Some people will continue to be stupid, but that's not a reason NOT to implement these rules. That's like saying, don't bother installing red light cameras because some people will continue running red lights.
The new rules may not work 100%, but if it weeds out some people from getting in over their heads, then that's a good thing. IMO this was a long time coming, and it never should have been that lax in the first place.
Baby #2: Surprise BFP 9.19.12, EDD 5.24.13, natural m/c 10.19.13 at 9w
Haven't read it yet, but understand the basics. That Canada is working towards being even more conservative than have in the past. I think its great now - though in Canada we never really got in the same trouble as the US b/c we were never as generous/stupid as them.
From what I understand this change may also help keep mortgage rates a bit lower which also works for us since we'll be renegotiating our mortgage later this year.
Baby #2: Surprise BFP 9.19.12, EDD 5.24.13, natural m/c 10.19.13 at 9w
I am beyond anal when it comes to financial planning. We actually have an appointment to talk to our RE on Saturday about how to go about selling our current home (DH owned it before we were married and we need to look bigger for family).
I have done all the math and figured out how much we can afford based on just DHs income (and I am the main breadwinner) and not go above ~34% of net income on mortgage/utilities. We already have 20% for downpayment, enough for closing costs, some left over for furnishings, odds and ends and what not and an e-fund. I'm the product of watching my parents financial misadventures and will NEVER live like they did.
This 100% affects DH and I. We are in the process of buying a house at the moment and actually are days away from signing (yay!!) I specifically asked our mortgage broker to pre approve us based on a specific amount of the house we were looking at (which she didnt)! I also asked her to lock us in at the rate she had quoted us...and when I called her today she said ummm actually she locked us in at a lower rate (which normally I would yay for) BUT only for 1 year as opposed to the 30 yr term we asked for! I flipped....I want to be locked in at a low rate. Im not willing to risk what we have saved for on possibly higher interest rates (to which I personally believe they will rise in the next while).
We are lucky to get in at 5% down right now and yes I completely agree with you in that upwards of 20% down is needed to weed out those that can and cannot afford a house BUT although we can afford more than 5% down..we have a baby on the way and I am not working and we have other expenses that I would RATHER spend my money on and need to spend money on at this time. If it 100% HAD to be 20% down right now we could not afford a house simply because of timing. That being said...we need a house with baby on the way so I am very very thankful for the 5% down at this current time. I think for 1st time homebuyers these new rules are going to be a major kick in the butt and a lot more of them will be living with their parents for a heck of a lot longer trying to save up the qualifying amount...just saying.
BUT YAY!! I get a house and YAY baby will have a room to come to! So I cant complain haha...welll actually maybe I can complain about my mortgage broker who stinks and never calls me back and is always out of the office...
I do not see it having a large impact. You only need a 20% down payment when purchasing a property that is to be rented. So someone buying a primary residence will only be affected by the approval on the 5 year fixed term.
I think it is a good step in the right direction.
I feel ya 100% on being anal about financial planning and parents misadventures.
I agree that there should be strict rules for people wanting to purchase a home, and they should be able to demonstrate that they will be able to pay their mortgage.
That being said the new changes, specifically raising the downpayment to 20% would have affected DH if we were buying right now, thankfully we purchased our home last year. It would have taken us YEARS to save up the 20% for a downpayment vs 5% down. We would've been renting forever.
We were responsible though. We did our research, figured out how much we could afford and did not buy over that amount. We knew what we were getting into, and made sure we could do it.
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These rules will effect people the most when interest rates start creeping back up (in the next 3-4 mths).
Until then, there shouldn't be much effect.
?