Federal Finance Minister Jim Flaherty announced the following changes to insured mortgages effective April 19, 2010:
1. Properties that are not owner-occupied now require a 20% downpayment.
2. Owners wanting to refinance their existing insured mortgage will be limited to 90% loan-to-value versus the current 95%.
3. Borrowers wanting a variable rate mortgage will now be qualified at the 5 year fixed rate.
It appears these changes are aimed at investors or, as Flaherty deems them, "speculators". The intent is to prevent people from using their property as a "bank machine" to take out equity, buy more property, drive up property values and create a housing "bubble". The Canada Mortgage and Housing Corporation was not designed to provide mortgage default insurance for this purpose and this closes that loophole. Lenders are now assuming the risk rather than the taxpayer.
Century 21 Home Realty Inc. Brokerage