First Time Home Buyer: Your Buying Power Has Changed by Richard Batke, Mortgage Broker, Penticton and Summerland BC

Buying power - How the new mortgage guidelines affect the First Time Home Buyer by Richard Batke, Mortgage Broker, Penticton and Summerland BC

The new mortgage lending guidelines are now in effect in Canada, here is how they affect First Time Home Buyers.

The Following comparison is using today's mortgage interest rates for all calculations.

Before April 19 Mortgage Lending Changes:

Someone qualified to carry a $1 500/month mortgage payment could purchase a home worth:

1. $394 200 with a 2 year term, Fixed
    Rate Mortgage

2. $365 500 with a 3 year term, Fixed
    Rate Mortgage

3. $365 500 with a Variable Rate
    Mortgage

4. $329 500 with a 5 Year Fixed Rate

1. $276 100 for all closed terms less than 5 years, including Variable
    Rate Mortgages

2. $329 500 with a 5 Year Fixed Rate

Purchase power reduction:  $39 000

Summary:

Granted 2 year terms for first time home buyers were not popular for many reasons, the variable rate mortgage was.  The reduction in this example from the 3 year term and variable rate mortgage is $36 000 as compared to the 5 year fixed rate mortgage.

As you can see, the new mortgage lending guidelines have effectively eliminated the variable rate mortgage and all mortgage terms less than 5 years as viable options for first time home buyers with less than 20% down payment.

Said another way, all first time home buyers with less than 20% down payment will likely use the 5 year fixed rate mortgage to finance their home, unless they buy a home that is worth less than the maximum amount they are qualified to buy.

This can be an excellent choice for some people, but that is a topic for another blog entry.

This is not an extraordinary change, it is returning to similar guidelines we have experienced in the past, though we can still have a minimum down payment of 5%, rather than the old policy of 20% from years gone by.

The real estate market will adjust accordingly, and settle down into business as usual.

Richard Batke - Mortgage Broker

2004 Main St. Penticton, BC V2A 5H4

Direct: 250-809-0285
email: richardbatke@invis.ca
web: www.richardbatke.com
blog: www.southokanaganmortgages.com
map: 2004 Main St., Penticton, BC

Richard Batke Mortgage Broker

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Serving the South Okanagan, including:

Summerland BC | Penticton BC | Naramata BC | Okanagan Falls BC | Oliver BC
 Osooyoos BC | Keremeos BC | Princeton BC