New Mortgage Rules for Homebuyers

Time February 16, 2010 User John Moher Email Print Comment 0 Comments Share Link

Federal finance minister Jim Flaherty announced three important changes to mortgage rules this morning that will affect borrowers in Canada’s real estate market. The purpose of the new rules is to discourage Canadians from taking on unaffordable debt and to put a check on real estate speculators.

The first major change involves insured mortgages. Under the new rules, in order to qualify for an insured mortgage, borrowers must now meet the standards for a new, five year fixed-rate mortgage, even if borrowers choose a mortgage with a lower interest rate and shorter term. Under the current rules, borrowers only have to meet the standards for a new, three year fixed-rate mortgage. The aim of this measure is to help borrowers prepare for future increases in interest rates.

The second major change will affect investors, who will now have to put down 20% of the purchase price in order to qualify for a mortgage. 

The third major change will affect those borrowing against the equity they have built up in their homes. Under the new rules, the maximum amount that can be borrowed against one’s home will decrease from 95% to 90%.

The new rules are expected to come into force on April 19, 2010.  For further information:

"Government of Canada Takes Action to Strengthen Housing Financing”  Ministry of Finance, Feb 16/10.

"Rules Tightened for Home Buyers” The Toronto Star, Feb 16/10. Source: Yourhome.ca

Tags: federal changes to mortgage rules
Categories: General Interest

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