New Mortgage Rules Rolled Out Today!
You may have already heard, but just in case we wanted you to hear the latest news from us! As of April 19th 2010 there will be new borrowing rules in place for home buyers. The biggest change is in the qualifying process for a mortgage. Currently, borrowers have to qualify based on the 3 year fixed rate, even if they actually choose to go with a variable rate or a shorter term. The new rules will require borrowers to qualify at the 5 year fixed rate. The impact is that the amount of mortgage that some borrowers will be able to qualify for will be a bit less. Could this have some impact on house pricing? Perhaps, but since many borrowers today choose a 5 year mortgage, it may have less of an impact than some think.
The second change is the rule regarding HLOC’s or Homeowner Lines Of Credit. Many consumers have made good use of the increased equity in their homes by taking out a line of credit for items such as home renovations or other major expenditures. Currently a homeowner can borrow up to 95% of the appraised value when refinancing their home but as of April 19th this will be reduced to 90%.
The third change involves mortgages for non-owner-occupied properties, or in other words, investment properties. CMHC insured mortgages on investment properties will now require a 20% minimum down payment.
Why is the government putting this in place? There are a lot of opinions out there, but the bottom line is that our market is having a marvellous recovery and they want to ensure it is sustainable in the long term. And they also want to ensure that even if/when interest rates rise every homeowner will be still be able to pay their mortgage.
At Schmidt Realty Group we have always promoted responsible home ownership. What does that mean? It means we believe in helping our clients buy a great home that fits into their total financial picture. So while this may have an impact on some , it’s our opinion that the vast majority of Canadian consumers will continue to be able to readily obtain financing for their personal residence and investment property purchases.
Want to learn more? Hear the news straight from Canada’s Finance Minister, Jim Flaherty on this video from The Canadian Press and read one writer’s opinion in The Globe And Mail about why this won’t hurt most homeowners.
Contributed by Kathy Schmidt, Broker Owner of Schmidt Realty Group Inc.
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