Effective April 19, 2010 Qualifying Interest Rate Guidelines Will Change
- Fixed Rate Mortgages of terms less than 5 years and all Variable Interest Rate Mortgages: applications will be adjudicated based on the greater of the 5 Year Bank of Canada Benchmark Rate**, or the actual customer rate (inclusive of any customer discretion).
- Fixed Rate Mortgages of terms 5 years or greater: applications will be adjudicated based on the actual customer rate.
- This change applies to both conventional and insured mortgages.
The three key changes associated with this announcement are:
- Borrowers will need to be able to afford a five-year fixed rate mortgage, even if they choose a mortgage with a shorter duration.
- Investors, who want to buy a home that they don’t plan to live in, will have to make a minimum down payment of 20%.
- Canadian home owners will only be able to withdraw 90% of the value of their homes in a refinancing, down from 95%.
The good news is that buyers still can purchase a home with 5% down and can still go up to a 35 year amortization. The reason for the changes is the Government of Canada is wanting to make sure that if interest rates go up, purchasers will still be able to afford their mortgage payments. With regards to refinancing your home, the Government of Canada is trying to discourage people from borrowing against their home for a quick fix for their financial problems. They are trying to have home owners use their home as a savings tool and not just an easy way to keep consolidating their debt.
Please call me if you have any further questions on the changes or if you would like to go through a free no obligation mortgage information session. We can look at pre-qualifying you for a mortgage, rate hold guarantees, even refinancing or renewing an existing mortgage. I look forward to hearing from you! 1-888-819-6536