Qualifying. Investing. Refinancing.
Changes are coming for your mortgage requirements. Here's how the rules may affect you.
Last month, Finance Minister Jim Flaherty announced three major mortgage rules that will come into effect by April 19, 2010. With these new restrictions, the Canadian government is attempting to mitigate residential foreclosure rates in the coming years.
Here's what's changing:
- Qualifying rate is moving up. If you plan to qualify for a variable-rate mortgage after April 19, 2010, expect your approval amount to be calculated using the 5-year posted fixed rate (currently at 5.39%). This move is designed to help protect Canadian homeowners, should rates go up with this type of mortgage term.
- High-ratio mortgage investors. Anticipate a minimum 20% down payment for rental and investment property mortgages after April 19. This change essentially makes it a bit harder to access this risky model of 'building wealth,' considering the steep insurance premiums (upwards of 8.4%) that high-ratio investors pay on borrowed funds for an income property mortgage.
- Debt consolidation. Currently, you can re-finance a property up to 95% Loan-to-Value (LTV). After April 19, this benchmark will change to 90% LTV. Again, this change is considered to be a proactive measure to help ensure successful home ownership.
If you're thinking about getting a mortgage loan or refinancing soon, you'll need to have your approval in right away to be unaffected by the changes. While these new rules will take effect in a few short weeks, be forewarned that some lenders may implement them sooner, ahead of the April 19th deadline.
Have questions? Or need to lock in your rate or mortgage approval? We're here for you.