Mortgage Q and A: I recently purchased a house and the Lender wanted to see the 2020 Property tax notice, why is this necessary
October 7, 2020 | Posted by: Dawn Stephanishin
Question: I recently purchased a house and the Lender wanted to see the 2020 Property tax notice, why is this necessary?
Answer: When you are buying a home and applying for Mortgage Financing, there are financial calculations used to ensure that the overall costs of owning the home meet current regulatory rules. One of the calculations is called the Gross (Property) Debt Servicing, the amount of the current year property taxes, Mortgage Payment, Strata Fees and heating costs are limited to be about 1/3 % of your total income. Most Lenders want to see the calculation within 35-39% of your income.
To further complicate the answer, many of the lowest Mortgage Rates available today are for Mortgage Default insured Mortgages from one of the 3 Insurers in Canada for applicants with less than 20% down payment and are purchasing a home. In July, CMHC further reduced the maximum calculation to be only 35% for all applicants. Genworth and Canada Guaranty did not follow the change.
Many of our Lenders today, are looking for liquidity of Mortgage Funds and are also using the Government of Canada -Lender paid insurance for buyers with more than 20% down, allowing Lenders to offer a lower Mortgage Rate on Purchases if you have more of a down payment. These programs must fit within the GDS calculations or the Lender cannot use the Government Guarantee and the Mortgage Interest rate will be higher. We collect the current year property tax notice to ensure the GDS calculations are met from the start of the process.
Simply ask for the 2020 property tax notice from your Realtor when writing the offer to purchase on your new home!
Have more questions? I would love to help answer them for you.