New Mortgage Rules Apply Today

If you are involved in the real estate market, whether buying or selling, you might be aware that the Canadian government implemented its new qualification rules today for refinancing or buying a home. If you are considering purchasing a home, or refinancing, before the introduction of HST on July 1, you will need to consider the changes that might affect the amount of home that you can buy.

 Here are the main changes to the mortgage rules:

  1. Qualifying
    Borrowers must qualify for the five-year fixed term mortgage rate, no matter what product they are purchasing.  It was previously based on the three year term.  What it means to you is that you will need an extra $9,200 in annual income to qualify for the mortgage on a $337,000 home.
  2. Refinancing
    Homeowners can now only withdraw up to ninety percent of their equity.  This is up from ninety-five percent.  It might mean that some homeowners will have to put off other big purchases.  On the plus side, the government is limiting the risk of negative equity homes–a fact of life in a declining value market (see the United States).
  3. Speculation
    Investors will be required to put twenty percent down on the purchase of a home that they are not going to live in.  The purpose of this change is to reduce the number of speculators in the market.

Call me if you want to know how, or if, the mortgage changes affect you.