Mortgage Advice

[Sylvanfan]

Originally Posted by MJK

CMHC Fees:


5% downpayment .......$5486

7.5% downpayment ....$5342

10% downpayment ....$3780

Are these normal?

Sounds about right. I think for a 5% down payment you do have to turn around and pay 2.5% as a high ratio mortgage insurance. The more you put down the less risk you are of going into negative equity and wanting to default on the mortgage. Given the $1700 different and that the difference between 5 & 10% down payment would seem to be around $10,000 I'd look for a way to come up with that other money and save on the insurance.

Others are better versed in this, but I don't know if you could take it out of your RRSP, than get a RRSP loan and put it all back in your RRSP's right away.

[albertGQ]

Here is a link to the premiums chart straight from CMHC's website

http://www.cmhc-schl.gc.ca/en/co/moloin/moloin_005.cfm

[8sPOT]

Might be worth mentioning that the down payment requirement is now 20% to avoid having to be insured through CMHC or Genworth.

[Mike Oxlong]

Here's a link to CMHC's guidelines:
http://www.cmhc-schl.gc.ca/en/hoficl...e-03-27-09.pdf

Down payments can come from borrowed sources provided it is between a 5% and 10% down payment.
(Page 2 under downpayments)

If you are borrowing funds to get to that magic 20% mark then it isn't CMHC guidelines you are worried about it is the lenders. A lot of lenders will allow you to borrow the down payment provided the additional debt load you are taking on does not screw up the debt ratios.

[Bill Bumface]

Originally Posted by MoneyGuy

Rates will definitely go up, but probably not anytime soon. The Bank of Canada is on record as saying that interest rates will not increase for 12 months. I met with a mutual fund manager yesterday and asked him about this and he confirmed it.

^ No all first-time buyers should not access their RRSPs. If that's the only way you can do it, then fine, or if it helps you to reduce the CMHC then maybe, but otherwise do not touch your RRSPs. There is the opportunity cost of the money not being in the RRSP.

5 year mortgages are based largely off the bond market, so although prime will sit for 12 months, its very possible (and has been happening slightly lately) that 5 year rates will creep up as things recover.

[MoneyGuy]

Originally Posted by hulkrogan

5 year mortgages are based largely off the bond market, so although prime will sit for 12 months, its very possible (and has been happening slightly lately) that 5 year rates will creep up as things recover.

Agreed. They may go up a wee bit, but nothing to be concerned about, I'd say. Folks have bigger things to worry about than a rise of 25 bps.

Originally Posted by Mike Oxlong

If you are borrowing funds to get to that magic 20% mark then it isn't CMHC guidelines you are worried about it is the lenders. A lot of lenders will allow you to borrow the down payment provided the additional debt load you are taking on does not screw up the debt ratios.

Yes, as I said.

[MJK]

Just for fun, here is the place I am looking at getting:











It comes fully furnished and with a boat!

[onetwo_threefour]

Originally Posted by Mike Oxlong

Here's a link to CMHC's guidelines:
http://www.cmhc-schl.gc.ca/en/hoficl...e-03-27-09.pdf

Down payments can come from borrowed sources provided it is between a 5% and 10% down payment.
(Page 2 under downpayments)

If you are borrowing funds to get to that magic 20% mark then it isn't CMHC guidelines you are worried about it is the lenders. A lot of lenders will allow you to borrow the down payment provided the additional debt load you are taking on does not screw up the debt ratios.

I assume you are referring to the following...

Traditional Sources: Applicant savings, RRSP withdrawal, funds borrowed against proven assets, sweat equity (<50% of minimum required equity), land unencumbered, proceeds from sale of another property, non-repayable gift from immediate relative, equity grant (non-repayable from federal, provincial or municipal agency).

Non-traditional Sources: Any source that is arm’s length to and not tied to the purchase or sale of the property such as borrowed funds, gifts, 100% sweat equity and lender cash back incentives.

Obviously this does allow for borrowed down payments, but it clearly requires borrowed down payments to be from an arm's length source not tied to the purchase or sale of the property. My original objection with the statement was that MoneyGuy said you could borrow your down-payment from your parents. My concern still stands with that statement. It's clearly not arm's length, and regardless of when the money is being given, it's still a loan. You may say that if it's delivered more than 90 days in advance CMHC won't go looking to make sure it's not a loan, but in my view that's still a non-arm's length loan. Furthermore, in my experience, a problem often arises because the parents end up calling the lawyer and asking for a caveat or mortgage be registered against title with respoect to the loan, and then, as a lawyer you're really in murky waters because it's both non-arm's length AND they're tying it to the purchase and sale of the home!

The idea behind the non-traditional sources is that you can use a personal line-of-credit or some similar vehicle, not that you can ask your parents to loan you the down-payment. At this point we may have to agree to disagree, but I will continue act based on my interpretation of the rules which is backed up by most mortgage brokers and lawyers that I know who are familiar with them. I have definitely had to turn away business for this very reason and have a file in my office with this concern at this very moment, so it's not like I'm a babe in the woods on this stuff. However, I recognize that that is not what this thread is for, so I will just leave this as my cautionary view for anyone interested, only because I didn't want to leave the impression that I agreed with the dominant position here by not responding to the last posts.

And back on-topic, that's a pretty nice looking piece of property...