What's New

Category: What's New in 2010

New Mortgage Rules Take Effect

Federal mortgage rules announced two months ago by Finance Minister Jim Flaherty took effect on Monday, April 19, 2010.

Under the new rules, the federal government will:

Require all homeowners meet the borrowing standards for a five-year fixed-rate loan even if they choose variable or shorter-term loans. This initiative will help Canadians prepare for higher interest rates in the future.
Lower the maximum Canadians can withdraw when refinancing their mortgages to 90 per cent from 95 per cent of the value of their home. This will help ensure home ownership is a more effective way to save.
Require a minimum 20 per cent down payment to qualify for CMHC insurance for non-owner-occupied properties acquired as an investment - a move aimed at cooling real estate speculation

Flaherty did not change the rules affecting the five per cent minimum down payment or the 35-year maximum amortization period for a mortgage.

Impact of the new mortgage rules

Borrowers will need to contact their mortgage broker to find out their qualifying amount based on a five year rate.
The rule doesn’t apply to customers who want a five-year fixed-rate mortgage. As a result, those customers face a less stringent test, since they need only prove that they can afford the rate they are actually signing up for.

The 20-per-cent minimum down payment rule for non-occupied properties is less likely to make a significant dent in real estate activity as there are no rules as to where those funds can come from. There is nothing in the rules that would prevent homeowners from withdrawing equity from their primary residences to meet the 20 per cent threshold on a second investment property, for example.

If you are looking to purchase a home, contact our office for more information regarding the new mortgage rules.

(Source: The Canadian Press)

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