Mortgage options restricted

Brandon Scott is a Sherwood Park based mortgage consultant and the author of a weekly column entitled Real Estate Solutions in the Sherwood Park News. This article was originally published on May 4, 2012 You may not have ever heard of The Office of the Superintendent of Financial Institutions (OSFI), but this governing body has been very active proposing rule changes to restrict Canadians’ mortgage options. The OFSI is a federal agency established in 1987 to supervise financial institutions such as banks, trust companies, life insurance and property insurance companies. In addition, they monitor pension plans and provide advice to the Government of Canada. In an effort to maintain its accountability to Canadians, OFSI has been focused on proposing new regulations to address their concern for rising debt levels given the ongoing low interest rate environment. Of the many changes being proposed, one is the ability for borrowers to purchase a home with no down payment, also referred to as the zero down or cash-back mortgage. While not everyone qualifies for this type of financing, it can help Canadians get into their homes faster, potentially saving thousands in rent and giving them a jump-start on building wealth. As an example, a purchase of $200,000 would typically require one to put down a minimum of five per cent, or $10,000. In this type of mortgage program, lenders are willing to provide the down payment on the homebuyer’s behalf. In exchange, the lender doesn’t discount the mortgage interest rate for the initial term, which allows them to make back not only the interest on the mortgage, but extra to repay the down payment they provided to the homebuyer. If OFSI has its way, this zero down mortgage offering could be a limited time opportunity and cash back options will no longer be available. Right now, these new rules are just a proposal and out for comment, although it’s quite possible they will be implemented. As a result, qualified homebuyers should take a look at these opportunities now while they are still available. This type of financing is certainly not for everyone, but if you have stable income, good credit and the ability to comfortably handle your monthly mortgage payment and ongoing housing expenses, a well-designed mortgage plan like the zero down or cash-back mortgage can get you in your home sooner. 2   Download the current e-edition of the Sherwood Park News