Mortgage Rules To Change
February 16th, 2010 by Paul
Finance Minister Jim Flaherty announced new rules aimed at preventing homebuyers from getting in over their heads with mortgage debt. (Fred Chartrand/Canadian Press)
Finance Minister Jim Flaherty announced new rules Tuesday aimed at preventing homebuyers from getting into financial difficulty when mortgage rates rise.
After consulting with major Canadian lenders, Flaherty outlined the latest weapons at Ottawa’s disposal aimed at removing some of the speculative froth in the
housing market.
“There is no evidence of a housing bubble, but we’re taking prudent steps today to prevent one,” he said at a press conference in Ottawa.
Broadly speaking, the plan unveiled has three components.
First, Ottawa will require that all borrowers meet the standards for a five-year fixed-rate mortgage, even if they choose a variable mortgage with a lower rate or a shorter term.
“This will guard against higher rates in the future,” Flaherty said.
Second, the proposed rules would lower the maximum Canadians can withdraw when refinancing their mortgages to 90 per cent of the value of their home, from 95 per cent.
And finally, Ottawa will now require a minimum 20 per cent down payment to qualify for CMHC insurance for non-owner-occupied properties purchased as an investment.
The last rule is aimed at reining in would-be real estate speculators who own multiple properties beyond their primary residence.
“We want to discourage the tendency some people have to use a home as an ATM, or buy three or four condos on speculation,” Flaherty said.
There had been speculation the Department of Finance might implement legislation raising the minimum down payment from five to 10 per cent of a home’s value, or reduce the maximum amortization period from 35 years to 30 years.
Those measures were not part of Flaherty’s announcement on Tuesday, but all options are still on the table should circumstances change, Flaherty said.
Read more: http://www.cbc.ca/money/story/2010/02/16/mortgage-flaherty.html#ixzz0fhxjf35K
I thought this may interest you, especially if you are thinking about refinancing or looking to purchase an investment property.
If you have any questions regarding this topic, or other mortgage questions, please do not hesitate to contact me at your convenience.
Paul Smith
Mortgage Agent
Lic #M09000464
P – 416-454-3823
C – 905-691-6796
E – paul.smith@migroup.ca
W – www.migroup.ca/PaulSmith
