Federal Finance Minister Jim Flaherty announced prudent changes to mortgage insurance rules intended to come into force on April 19, 2010. The Canadian Association of Mortgage Professionals (CAAMP), were actively engaged in the discussions around these changes and they are as follows:
- All borrowers must meet the standards for a 5-year fixed rate mortgage even if they choose a mortgage with lower interest rate and term.
- (The maximum amount one can withdraw in refinancing their mortgage will be reduced to 90%, from the current 95% of the value of one’s home.
- Non-owner occupied properties will require a minimum down payment of 20%
There were no changes to down payment requirements or length of amortizations for owner-occupied residences. In conjunction with CAAMP, we will continue to monitor developments including transitions rules. This is all very positive news for the real estate market. Amortizations continue to remain at 35 years and minimum down payments have not changed for owner-occupied properties and remain at 5%. As far as borrowers having to qualify based on a 5-year fixed, we are going back to the way borrowers had to qualify a number of years ago. Clients all had to qualify on a 5 year fixed payment even if they went with a shorter term or variable mortgage versus closed. This is a protective stance to ensure buyers can afford their monthly payments and are not purring themselves at risk. Most lenders have already been qualifying clients this way and should not have a very strong impact on purchasers. The changes to refinances will not affect purchasers unless they are looking to take out additional funds over and above the cost of the home which will now be to a maximum of 90% – not 95%.