Government Changes to Lending Guidelines / Modifications apportées par le gouvernement aux lignes directrices

Government Changes to Lending Guidelines / Modifications apportées par le gouvernement aux lignes directrices


Subject: Government Changes to Lending Guidelines - Insured and Conventional Programs
Date: April 15, 2010
What’s New?
Effective April 19, 2010, the following changes will apply to mortgages based on changes announced by the
Department of Finance earlier this year:
•
Changes to Qualifying Interest Rate
•
Changes to Loan to Value (LTV)
•
Changes Related to Rental Properties
•
Changes to Insured Second Home Criteria
Details
Changes to Qualifying Interest Rate
•
Applicable to both insured and conventional mortgages.
Mortgage Type
Qualifying Rate
Fixed rate mortgages with a term less than 5 years
Greater of MQR* or Contract Rate
All variable rate mortgages
Greater of MQR* or Contract Rate
Fixed rate mortgages with a term 5 years or greater
Contract Rate
Note:
1) For the FirstLine Matrix Mortgage Suite, the loan portion will be qualified based on the criteria as set out above and
the line of credit portion will be qualified at the Mortgage Qualifying Rate (MQR).
2) The *‘MQR’ is defined as the Chartered Bank-Conventional Mortgage 5 year rate that is the most recent interest
rate published by the Bank of Canada every Wednesday and can be found by clicking on the following link
http://www.bankofcanada.ca/en/rates/interest-look.html and then clicking the tick box “V121764” – 5 year mortgage
rate within the “Conventional mortgage” section.
3) The Contract Rate includes any discretionary pricing.
4) Applications dated before April 19, 2010 will continue to be adjudicated based on the old rules provided the
borrower has a legally binding purchase and sale agreement that’s also dated before April 19, 2010.
Changes to Loan to Value (LTV)
Insured Mortgages
New LTV Effective April 19
LTV Prior to April 19
Refinances (ETO)
90% LTV
95% LTV
Non-Owner Occupied Rental Properties
80% LTV
95% LTV
Total Debt Service Ratio for Insured Refinance Mortgages:
• The maximum TDSR for insured refinance mortgages is limited to 42% from previous tier system based on bureau
scores.
Additional terms and conditions may apply. Content is subject to change without further notification.
FirstLine Mortgages is a division of CIBC Mortgages Inc. ® Registered trademarks of CIBC Mortgages Inc.
TM
Trademarks of CIBC Mortgages Inc.
Changes related to non-owner occupied rental properties and owner occupied properties with a rental component
Conventional Mortgages – non-owner occupied rental properties where the borrower does not own more than 2
rental properties
•
50% of the gross rental income can still be added to the Gross Annual Income.
•
The option to deduct 30% of the gross rental income from the PITH has been eliminated.
•
Revised acceptable calculation:
PITH* (subject property) + other debts service costs + PITH (any other rental properties)
Gross Annual Income + 50% of Gross Rental Income (from subject property and any other rental properties)
Conventional Mortgages - owner occupied properties with a rental component
•
50% of the gross rental income can now be added to the Gross Annual Income (previously 80% of the gross rental
income could be added to the Gross Annual Income).
•
The option to deduct 30% of the gross rental income from the PITH has been eliminated.
•
Revised acceptable calculation:
PITH* (subject property) + other debts service costs + PITH (any other rental properties)
Gross Annual Income + 50% of Gross Rental Income (from subject property and any other rental properties)
Insured Mortgages – non-owner occupied rental properties and owner occupied properties with a rental
component
•
The option to deduct 80 % of the gross rental income from the PITH is no longer applicable.
•
50% of the gross rental income can now be added to the Gross Annual Income.
•
This applies to owner occupied properties with rental component (combination) properties and all rental properties.
•
Revised acceptable calculation:
PITH* (subject property) + other debts service costs + PITH (any other rental properties)
Gross Annual Income + 50% of Gross Rental Income (from subject property and any other rental properties)
•
For owner occupied applications with a rental component owner occupancy must be confirmed at the time of
application.
•
Rental income from all other rental properties is to be treated in the same manner as other non salaried income.
Net income must be supported using the average income from the previous two years showing on the borrower’s
Notice of Assessment or audited financial statements prepared by a licensed accountant.
*PITH means cost of principal, interest, taxes, and heat plus 50% of the condominium fees, and 100% of site ground rent for leasehold.
Changes to Insured Second Home Criteria
•
Insured second homes must be one unit owner occupied properties. Previously the property could have up to 4
units.
•
An insured second home must be owner occupied by the borrower or a relative of the borrower on a rent free
basis; owner occupancy must be confirmed at the time of application.