Mortgage rule changes

Federal Finance Minister Jim Flaherty announced three new rule changes Tuesday connected to government-backed insured mortgages, CMHC, saying the government is "taking proactive, prudent and cautious steps" to prevent a housing bubble.

Here are the three changes to the requirements:

  • Under the new rules all borrowers must now qualify at the five-year fixed mortgage rate even if they choose a shorter-term or lower-interest rate product.

  • The government has also lowered the maximum amount Canadians can withdraw through refinancing their mortgages from 95% of the value to 90%.

  • The government has introduced a new minimum down payment for non-owner occupied properties purchased “for speculation” to 20% of the purchase price.

    Scott Mason of Complete Mortgage Services endorses the recent government changes because he believes it will help stabilize the market place going forward.

    In the past Scott has always encouraged his variable rate clients to increase and fix their mortgage payments above the threshold of the floating rate minimum payment. This strategy helps mitigate any future payment shock to his clients once the Bank of Canada increases the Prime Lending Rate. This strategy also accomplishes paying down their mortgages much faster while benefiting when rates are at these historic lows. Those clients who are adverse to risk have been placed in five year fixed rate mortgages which currently are available for as low as 3.69 per cent OAC - a rate which is hard to beat in this marketplace.

    There are no definitive signs of a housing bubble,” Mr. Flaherty said. “We think we're being proactive in the three steps we're taking today. Our Government is acting to help prevent Canadian households from getting overextended and acting to help prevent some lenders from facilitating it,” says Minister Flaherty.

    “If some lenders aren’t willing to act themselves, we will act. These measures demonstrate the Government is committed to taking action when necessary to support the long-term stability of a sector that is so vital to our economy and the financial well-bring of Canadian families.”

    These adjustments to the mortgage insurance guarantee are to come into force on April 19, 2010.

    Here is the link for the article on the Department of Finance website:

    Government of Canada Takes Action to Strengthen Housing Financing

    This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

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    About the Author

    Tracy Head and Laurie Baird help busy families find mortgage solutions. Together they have more than 45 years of experience in the mortgage industry.

    With today’s increasingly complicated mortgage rules, Tracy and Laurie spend time getting to know the people they work with and help them to better understand the mortgage process. They support their clients before, during, and after their mortgage is in place.

    Tracy and Laurie work closely with their clients, offering advice and options. With access to more than 40 different lenders, Tracy and Laurie are able to assist with residential, commercial, and reverse mortgages in order to match the needs of their clients with the right mortgage package.

    They work closely with their clients to find the right fit, and are around to provide support for years down the road!

    Contact them at 250-862-1806 or visit www.okanaganmortgages.com

    Visit their blog at www.okanaganmortgages.com/blog


    The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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