Tighter Mortgage Rules Upcoming

General Angela Calla 5 Jul

The Angela Calla Mortgage Team is committed to giving you information in real time so you can use it to your advantage. By contacting us today to see what your options are under the current guidelines we can help you renew or refinance your current mortgage today before these policies come into place by years end. If you have questions on your mortgage, or for someone that you care about, please call or e-mail us today.

Stricter Debt Ratio Standards on the Way

If you’re a typical borrower, your debt ratio’s will largely determine if you’re approved for a mortgage.

For applicants who push the limits of qualification, those approvals have been tougher to come by. That’s a direct result of last year’s mortgage rule tightening, which imposed stricter debt ratio calculations (among other things).

And by year-end, those calculations will get even more conservative.

On June 27, CMHC issued new guidelines for calculating debt ratios and confirming income documents.

“Under current practice, CMHC stipulates standard formulas for calculation of debt service ratios but has not been specific as to how each key input is to be treated,” says CMHC spokesman Charles Sauriol.

These new guidelines will clarify that, and they become effective on CMHC-insured mortgages on December 31, 2013. (In practice, many lenders already apply them.)

These standards will apply to all insured 1-4 unit residential mortgages, regardless of the loan-to-value ratio. Uninsured (conventional) mortgages are allowed different policies, but most lenders will use the same rules for all their approvals.

Here are some of CMHC’s newly minted insured mortgage “clarifications” that will have the largest impact on your borrowing abilities:

  • For variable income: Lenders must use “an amount not exceeding the average income of the past two years.” Variable refers to things like bonuses, tips, seasonal employment and investment income.
  • For guarantor income:  A guarantor’s income must not be used in GDS/TDS ratios “unless the guarantor…occupies the home and is the spouse or common-law partner of the borrower.”
  • Unsecured credit lines & credit cards: For these debts, “No less than 3% of the outstanding balance” must be included in monthly debt payments. Interest-only payments are no longer considered on credit lines. Furthermore, lenders must assess the borrower’s credit history and borrowing behaviour when determining the amount of revolving credit that should be accounted for in debt ratios.
  • Secured lines of credit:  Lenders must factor in “the equivalent” of a payment that’s based on “the outstanding balance amortized over 25 years.” That payment must use the contract rate (of the LOC) or the 5-year Benchmark rate (V121764) published by Bank of Canada (if the contract rate is unknown). Again, interest-only payments are no longer allowed for debt ratio calculation purposes.
  • Heating costs:  Lenders must now obtain the “actual heating cost records” of a property. When no such history is available, the heat expense used in debt ratio calculations “must be a reasonable estimate taking into consideration factors such as property size, location and/or type of heating system.” That’s why some lenders have now moved to a set heating cost formula, like:

           (square footage x $0.75) / 12 months

Compared to past methods (which entailed flat heating costs, like $100/month), the new guidelines can double or triple the heating cost that must be factored into debt ratios on larger properties, and reduce it on smaller ones.

It’s important to repeat that most of these policies are already being followed by most lenders. But there are exceptions.

Those exception-case lenders are commonly viewed as go-to sources when borrowers have tight debt ratios. These new guidelines are designed to minimize those “loopholes.”

All of this has come about, in part, because of Ottawa’s rule changes last July. At that time, the government fixed the maximum Gross Debt Service and Total Debt Service ratios for insured mortgages at 39% and 44% respectively.

Sauriol says that change “reinforces the importance for CMHC to ensure that debt service ratios provide the same measure of a specific borrower’s ability to service the mortgage debt, regardless of the lender submitting the application to CMHC for insurance.”

Courtesy of CMT

Angela Calla, AMP

Dominion Lending Centres-Angela Calla Mortgage Team

Host of The Mortgage Show Saturdays at 7pm on CKNW AM980

Phone: 604-802-3983 Fax: 604-939-8795

“An introduction to someone you care about is a big responsibility…it’s also the biggest compliment a client can give us & it’s not taken lightly. We pledge to treat everyone that is referred to us with the utmost respect & professionalism”.


Reach my Team Chris Adkins & Denzil Anderson at 604-939-8777 & callateam2@dominionlending.ca


Why we don’t reccomend Rent to Own

General Angela Calla 5 Jul

The Ottawa family who received a $10,000 cheque from an embattled rent-to-own business say they can’t cash it because the owner’s bank halted the payment.

Chantal Scott took the $10,000 cheque — delivered to her door on Tuesday evening by company owner Jean-Claude Lacasse — to a Laurentian Bank of Canada branch on Wednesday afternoon.

Full story here:


We alwaya reccomend these fundementals if you are renting and looking to buy.

1. Practice homeownership- calculate what it would cost to own and make that payment every month, with the remainder over and above the rent going to your personal savings account.

2. Have the savings portion go into your savings via automatic withdrawl, take advatage of an rrsp program if your company offers one as that will be off of pre-tax dollars.

3. Know your credit and how to maintain the best score.  Most rent to own victims are individuals hope to restore their credit and that’s why that option is considered and appears attractive in the first place. Unfortunitaly a rent to own does not help restore or esablish credit.  Renting to own puts you not in control of your own money.

If you would like to understand your options to purchase a home or would like to calculate a budget, contact the Angela Calla Mortgage Team directly to help you at 604-802-3983 or callateam@dominionlending.ca

Thank you for visiting


Published on Brighterlife.ca July 4th 2013 Top 3 Newlywed Mistakes

General Angela Calla 4 Jul

These days, getting hitched and buying a home seem to go hand in hand. But if you want your wedded bliss to last, avoid these three classic mistakes.

Newlywed home-buying mistakes Top three mistakes newlyweds make in their real estate purchases:

1. Focusing on the interest rate

Who can resist an ad that promises you’ll only pay 2.99% over five years for a fixed-rate mortgage? Very few, it seems. But the lowest interest rate doesn’t necessarily mean the best mortgage for your situation, says Angela Calla, an accredited mortgage professional with Dominion Lending Centres in Vancouver and host of radio’s The Mortgage Show. She says such a mortgage likely has restrictions and penalties. Younger couples may need a more flexible mortgage – one that allows them to pay more when they have more and less when a spouse is on maternity leave or facing job loss, for instance.

While the payments required to carry a hefty mortgage are lower than, say, a decade ago, Calla says the strategy should be to repay the debt as quickly as possible. That means paying more money towards the mortgage than you technically need to. This strategy will pay off greatly when interest rates return to more normal levels. “Today’s interest rates are a gift and young couples have a great opportunity to pay off a significant part of their mortgage,” she adds.

But are they doing this? By and large, the answer is no. Many newlyweds tend to lack an overall plan for paying off the mortgage, notes David Field, a financial advisor with WSC Insurance Group in Oakville, Ont.

2. Not talking about their finances

Picture it: A young couple goes out for a Sunday drive and spots a new housing development in a trendy area. They see the open house signs and decide to take a quick look, since they’re in the neighbourhood anyway. Presto! They’ve found their dream starter home. Calla hears a version of this scenario more often than she’d like. The problem is, couples haven’t run the numbers ahead of time. “A lot of times, they don’t take the time to get preapproved for a mortgage before looking. They don’t even understand about each other’s credit situation,” she says. “One of them may not be in a financial position to even purchase a home. That can put a damper on their plans moving forward.”

3. Not factoring in other expenses

Young couples definitely know the amounts of their mortgage payments for the next three to five years. But when Field asks his newlywed clients about their property taxes, home insurance policy premiums and how much they are setting aside for emergencies, details get scarce. Many couples’ budgets are more mortgage-heavy than they should be. But taxes and insurance can rise significantly each year, and that translates into a lack of cash flow.

The lesson here? Make sure you are saving properly for retirement and emergencies, then see how comfortably your mortgage, utilities and property taxes fit into what’s left over. “If your cash flow is too tight, if something happens like losing your job or having a new baby, you are really constrained,” says Field. “A new marriage has its ups and downs as it is; adding money problems to the mix really affects the marriage.”

Financing Options & Grants for Home Renovations

General Angela Calla 4 Jul

There are many different reasons to renovate a home: to save energy (and save on utility bills), to make room for a growing family, to improve safety or increase the resale value of your home, or simply to bring a fresh new look to your home. There are also a number of different ways to finance your renovation.

Explore your options
Your own resources: For smaller renovation projects, you may consider self-funding material costs, especially if you plan to do the work yourself.

Credit card: Likewise, you can use your credit card to pay for materials for smaller renovations. But be careful not to carry the balance for too long. Credit card interest rates can exceed 18%.

Personal loan: With a personal loan, you pay regular payments of principal and interest for a set period, typically one to five years. You also have the option of a fixed or variable interest rate for the term of the loan. The interest rate on a personal loan is typically less than that of a credit card. Unlike a line of credit, however, once you pay off your loan, you’ll have to reapply to borrow any new funds needed.

Personal line of credit: This is another popular choice for financing renovations. It’s ideal for ongoing or long-term renovations since it lets you access your funds at any time and provides a monthly statement to help track expenses. A line of credit offers lower interest rates than credit cards, and charges interest only on funds used each month. And, as you pay off your balance, you can access remaining funds, up to the line of credit’s limit, without reapplying.

Secured lines of credit and home equity loans: These options offer all the advantages of regular lines of credit or loans, but are secured by your home’s equity. They can be very economical, since they offer preferred interest rates, but keep in mind that initial set-up costs including legal



and appraisal fees usually apply. Lines of credit are typically limited to 65%, while home equity loans are capped at 80% of your home’s value.

Mortgage refinancing: When funding major renovations, refinancing your mortgage lets you spread repayment over a longer period at mortgage interest rates, which are usually much lower than credit card or personal loan rates. This type of financing can allow you to borrow up to 80% of your home’s appraised value (less any outstanding mortgage balance). Initial set-up costs including legal and appraisal fees may apply.

Financing improvements upon purchase: If you’re planning major improvements for a home you’re about to purchase, it may be advantageous to finance the renovations at the time of purchase by adding their estimated costs to your mortgage. Canada Mortgage and Housing Corporation (CMHC) Mortgage Loan Insurance can help you obtain financing for both the purchase of your home and the renovations – up to 95% of the value after renovations – with a minimum down payment of 5%.

Grants/rebates for energy-saving renovations

Across Canada, renovation grants and rebates are available from the federal and provincial governments and local utilities, especially for energy-saving renovations. If you qualify, they may help pay for some of your project’s costs.

Angela Calla Mortgage Team 604-802-3983 callateam@dominionlending.ca