Serving Hamilton, Grimsby & Niagara Region
September 5th, 2010 
Lynn Fee

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New Mortgage Rules – Not Doom and Gloom!
Tuesday, 23 March 2010, 03:03:25 PM
By now, you’ve probably heard about new mortgage rules—set to take effect April 19th. Fear not! A lot of people seem to be concerned or confused with the changes, so I’ve decided to help shed some light on them. Here’s what the new rules mean to you:

1. New Qualifying Standards
Borrowers must be able to handle a five-year, fixed-rate mortgage, even though they may opt for a shorter term and lower rate. The government said this test will help homebuyers prepare for higher rates. As it now stands at the major banks, borrowers are income-tested for a three-year fixed rate. The change could influence about 25% of all new mortgages. That does not mean the 25% of buyers won’t be able to buy, but it may mean they have to lower their expectations as to the size of the homes they want. Based on a 5% down payment and an average home price of $335,000, a buyer would need about $9,000 more in annual income to qualify under the changes. At $200,000 and 5%, that would fall to $5,500.

2. New Refinancing Rules
Refinancing homes will now be limited to 90% of the value of a property, down from 95%. That means property owners won't be able to draw equity back down to the 5% down payment level. The government said this will help make owning a home a more effective way to save.

3. New Downpayment Rules for Non Owner-occupied Homes
A minimum down payment of 20% will be required for government-backed insurance on properties not lived in by their owners, up from 5%. This will likely only impact individuals buying real estate for investment purposes, including rental properties, and is likely aimed at tempering speculative buying of real estate by reducing the leverage available to buyers.

These changes will likely affect between 5-10% of buyers, helping beef up their qualifications for a mortgage, and enforcing a more conservative approach to investing in real estate.

The GOOD NEW IS …. Home ownership is still, by far the best investment for your hard-earned dollars and we have qualified mortgage people to help you realize your dreams!


(Reference: Globe & Mail, Michael Babad; Canwest News Service; CBC News)
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