The following is an interview with mortgage specialist, Lino Contento from Royal Bank. Lino’s been in the Financial/Banking industry for 25 years and has been with Royal Bank since 1999. He’s going to share with us some important changes that have occurred in the Canadian mortgage industry over the past several months as well as provide us with some great tips when it comes to obtaining a mortgage. You can find out more about Lino at the end of this interview.
The mortgage lending rules have recently changed in Canada. What are some of these new rules?
There have been many recent changes to the mortgage industry in the past few months across Canada. Many of these new rules will impact the amount one can borrow. Below is a list of some of the changes:
–> Effective August 15, 2012, all Homeline Plans Line of Credit portions, cannot exceed 65% LTV (loan to value) of the home.
–> Certain programs, can no longer exceed 65% LTV, the programs include: Stated Income Program, New to Canada Equity Program, Rural Properties, High valued Properties, Clients looking to purchase or re-finance with a 600 credit bureau score or lower
–> For properties over $1,000,000 purchase, the banks have introduced tiering mortgages. For the first $1,000,000 the client can borrow up to 80%, and the remainder of the value (i.e. $500,000 if the purchase was $1,500,000) the client can borrow a maximum of 50%, this tiering applies solely within the GTA boundaries, anything outside the GTA have different tiering criteria to meet.
–> Default Insured Mortgages have changed, the government has reduced the amount of re-financing a home to a maximum of 80%. A maximum purchase price of $1,000,000 for any default insured property, Maximum amortization is reduced to 25 years for default insured; and a maximum GDS/TDS servicing ratio of 39/44% (if the client meets the criteria).
In your opinion, how do you see this impacting the housing market in the GTA?
We will see some slow down, but not a great deal of slow down. What these changes are doing is bringing the market back inline and having purchaser’s purchase more within their reach. It also allows people who are re-financing, not to re-finance all their equity in the home allowing them to have a cushion to fall back on.
Personal credit scores play a big role in qualifying for a mortgage, what are some of the things a lender looks for when it comes to credit scores?
Personal credit history and scores play a huge role in the mortgage process and in the way any application is looked at. Banks are looking for a high beacon score, credit balances that are below the limit, timely repayment and a good repayment history.
What advice would you give to someone who does not have a great credit score but is looking to buy a home?
If you do not have a good credit score, spend the next 6 months ensuring the following: Lower your balances to below limits, make all payments on time (by or before the payment due date), do not have many inquiries on your credit bureau, and if your problem is limited credit or creditors, apply for a credit card and establish a credit history.
Approaching a financial institution for a mortgage can be intimidating for a first time home buyer. What do they need to know and how should they prepare before approaching one for a mortgage?
The mortgage process should not feel intimidating. It should be a comfortable process. Approach your mortgage specialist and discuss your goals. Before looking for a home, you should have a mortgage pre-approval completed. This helps you determine the amount you can borrow and whether or not you will be approved at this time. As a mortgage specialist, I will guide you through the mortgage and purchasing process and give you the right financial advise that suits your needs. If you are looking to make a switch or re-finance your property, it is also best to speak to your mortgage specialist, who can advise you on the process and provide services such as switching for free.
Any parting advice for someone looking to obtain a mortgage?
Speaking to a mortgage specialist beforehand, allows you to have more knowledge on the products available to you. It allows you to feel comfortable in looking at homes in a price range that is right for you. A mortgage specialist will provide answers to your questions and is available 24/7. If you have any questions about obtaining a mortgage or starting the pre-approval process, you can reach me at (905) 553-3270
Lino is a RBC Mortgage Specialist located in Vaughan, Ontario. He helps families get a mortgage that suites their lifestyle and works with them to achieve their home ownership goals. He works with home buyers in Vaughan and across the GTA.
He is an avid supporter of the Sick Kids Hospital as well as many other non-for profit organizations. He is married and has 3 children. In his spare time, he enjoys the outdoors, vacationing, spending time with the family and working on various DIY projects.
You can find out more about Lino at mortgage.rbc.com/lino.contento or you can reach him directly at (905) 553-3270.