Loophole may help banks to lend to first-time buyers

Financial Post- There is a small loophole in the new federal mortgage rules that could make it easier for the banks to lend out money to first-time buyers.

The federal government announced last month new requirements for anyone borrowing money for a house and needing mortgage insurance. If you have less than a 20% down payment and are borrowing from a financial institution covered by the Bank Act, you have to take out mortgage default insurance, which ensures the banks are covered for any losses resulting from payment defaults.

For principal residences, the new rules force consumers to qualify for a loan based on being able to make payments on a five-year fixed-rate mortgage, which has a much higher interest rate than variable mortgages, now as low 1.85%…

Loophole may help banks to lend to first-time buyers

Don’t bite off more mortgage than you can chew

Financial Post-How much money do you really need to buy a house?

Based on the average sale price of $320,333 last year, the federal government says you must come up with about $16,000 before you can consider getting a mortgage to buy the rest of that home.

Current rules require mortgage insurance for anyone borrowing more than 80% of the value of their home from financial institutions covered by the Bank Act. Under the rules, consumers must have at least 5% down and cannot amortize their payments over a period of more than 35 years.

Those stipulations came after Ottawa’s supposed crackdown on the housing sector which had allowed zero down mortgages and 40-year amortizations….

Don’t bite off more mortgage than you can chew