Changes made to Canadian Mortgages

February 17, 2010 · Filed Under First Time Buyers and Real Estate Canada 

April 19th is the deadline for the old mortgage rules.  After this, the new changes proposed by the Canadian government earlier this week will be in effect.  Personally I think the rules are a good move from the governments part and in the long run protect Canadians from taking on additional debt.  As well, for those thinking we are in a housing bubble it should assist in slowing the pace a little.

Starting April 19th, the new mortgage rules are as follows:

1) All new borrowers will have to meet standards for the 5 year fixed-rate mortgages even if they’re seeking a shorter, variable-rate loan.

2) The maximum amount Canadians can withdraw when refinancing is now 90% of the value of their homes down from the current 95 per cent.  It’s a good idea to personally cap this at 80% – if you go over 80%, CMHC fees are applicable.

3) For those interested in an investment property, you will be required to have a 20% down payment for government-backed mortgage insurance on speculative investment properties.

The third rule change seems to be the harshest of the three as there are a number of people interested in buying investment properties for the long term (ie for retirement). It’s a big price hike for a down payment on an investment property now.  An average 2-apartment home in St. John’s is around $250,000.  This means a purchaser would need $50,000 for the down payment.  Again, the 20% will help avoid your CHMC fees when purchasing an investment property.

What are your thoughts for the new upcoming changes in Canada’s mortgage rules?

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Comments

One Response to “Changes made to Canadian Mortgages”

  1. Jason Luke on February 17th, 2010 2:09 pm

    I agree with you, being over leveraged in any market is risky. And with the lack of certainty as to whether the recession is truly over, I’d be inclined to advise my clients against taking on too much debt.

    Jason Luke – Burnaby Real Estate Services

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