New Mortgage Rules

 On February 16th 2010, Federal Finance Minister Jim Flaherty announced three changes to the mortgage insurance rules, which will come into effect on April 19th 2010.

1.  Minimum down payment requirements for non-owner-occupied homes will increase to 20% from 5%, and the way that rental income is considered has been scaled back as well.  This will have the most dramatic impact on real estate investors having to make more of a down payment and use less potential rental income for qualifying purposes will displace many new real estate investors, who only make up around 4% of all mortgage consumers in Canada.

2.  All borrowers will have to meet stricter qualification standards for a five-year fixed-rate mortgage.  But by providing the required documentation , you're much more likely to be approved for a mortgage based on you income.  The trouble is that if you cannot prove your income, you pose a higher risk in the eyes of lenders.  The riskier the borrower, the higher the interest rate you will be required to pay.  The average difference between a discounted three and five year rate is only between 0.30% and 0.49%, this should not significantly impact the average mortgage applicant. 

3.  The maximum amount Canadians can withdraw when refinancing their mortgages will be reduced from 95% to 90% of the value of their homes.  This change will likely have the most impact on those Canadians who have a current government-backed insured mortgage and would like to take advantage of the equity in their home to consolidate some debit in the future. 


Prior to the announcement there was wide-spread speculation that the government was going to change current mortgage policies to include a minimum 10% down payment, an increase from the current 5% and a reduction in amortization from a maximum of 35 years to 30 years.  Luckily for first-time buyer these rumours have not proven to be true.


Information collected from Steve Chittick, Dominion Lending Centres Homestead Financial



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The Hisey-McDermott Team

The Hisey-McDermott Team

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CENTURY 21 Miller Real Estate Ltd., Brokerage*
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