New Mortgage Rules Effective March 18, 2011
Federal Finance Minister Jim Flaherty announced changes to mortgage insurance rules intended to ensure the stability of Canada’s housing market. These measures included:
- Amortization period capped at 30 years
- Reduction of government backing for home equity lines of credit
- Maximum refinancing reduced to 85% from 90% loan to value
What does this mean?
These rules affect high ratio insured mortgages only at this time. For clients with 20% or more equity in the property, a 35 year amortization will still be available. There has been no announcements from lenders yet as to whether anything will change on conventional mortgages. Same thing with the change to refinances to 85% of value. No announcements as of yet from lenders as to whether they will continue refinances up to 90% on conventional. So stay tuned as more information comes out. There are no changes to down payment requirements. Changes come into effect March 18, 2011.
Be sure to talk to an Invis mortgage professional about how these changes could affect you and for advice on the mortgage strategy that fits your needs.
New Mortgage Rules Effective April 19, 2010
Finance Minister Jim Flaherty announced new mortgage rules intended to ensure homeowners can handle their debt load when interest rates rise, as well as to slow down real estate speculation.
“There is no clear evidence of a housing bubble, but we’re taking proactive, prudent and cautious steps today to help prevent one. Our government is acting to help prevent Canadian households from getting over extended and acting to help prevent some lenders from facilitating it,” commented Minister Flaherty.
The new rules were effective April 19, 2010. Here is a quick look at the changes, which apply to government-backed insured mortgages:
- Borrowers must now qualify based on a five year fixed rate even if they choose a mortgage with a lower interest rate and shorter term. The government’s rationale for this change is that it will help borrowers prepare for higher rates, although it may squeeze the purchasing power of home buyers. For all terms less than 5 years and any variable mortgages borrowers must qualify at a 5 year posted rate. All 5 year fixed terms are qualified at the rate of the mortgage.
- The maximum amount that Canadians can withdraw with refinancing their mortgages will be reduced to 90% of the value of their homes, instead of 95%. The government's rationale for this change is that is will help to ensure that home ownership is a more effective way to save. The impact from this change is expected to be minimal as relatively few homeowners withdraw equity from their homes to this extent.
- A minimum of 20% down payment will be needed on government backed mortgage insurance on non-owner occupied properties “purchased for speculation,” which realistically means rental properties. While this measure is intended to hamper the speculative buying of properties by reducing the leverage of buyers, it will also impact those buying real estate for general investment purposes.
Be sure to talk to an Invis mortgage professional about how these changes could affect you and for advice on the mortgage strategy that fits your needs.
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