Mortgage Changes and Clarification
To clarify any confusion,
YES you can still buy a home with a 5% downpayment; this has not changed. As well, lenders continue to offer the 5% cash-back option.
The 3 New Rules to Insured Mortgages follow:
- 90% Maximum Refinancing
Prior to the modifications, you could refinance and withdraw up to a maximum of 95% of the equity in your existing home.
With maximum remortgaging lowered to 90%, you will now be required to maintain a 10% equity position.
- 5-Year Qualifying for Lower Rate Mortgages
Whether buying or refinancing, you may choose a lower interest rate product, such as a variable rate or a 1, 2 or 3-year mortgage. However, you will now have to qualify at a 5-year fixed mortgage rate.
- 20% Downpayment for Investment
If you buy an income property like a duplex and you occupy one of the units, you can still buy with 5% down. If, however, you buy a property that’s non-owner occupied, for speculation and investment, you will need a minimum downpayment of 20% to obtain a government-insured mortgage.
The changes come into effect on April 19. However a number of lenders have already initiated their implementation.
On variable rate mortgages, qualifying for the 5-year fixed rate was in place even before the changes. Now this requirement simply extends to mortgages with a shorter than 5-year term, which typically have a lower rate.
Can sales be affected? More than likely, since buyers, at times, have opted for a 1, 2 or 3-year mortgage because they may not have qualified for the higher 5-year rate. On renewals, however, homeowners can more likely afford a rate change, making their payments affordable.