Jim Flaherty's Announcement Today
Jim Flaherty announced today that effective April 19, 2010 buyers will have to qualify under this set of guidelines:
- Any
borrower arranging a mortgage less than 5 years in term or a variable rate
mortgage must be qualified as if they are taking a 5-year term. It is not yet clear whether there will be a huge impact, as variable rate mortgages and terms of 3 years or less are already qualified on the 3-year posted rate. The 3-year posted
rate is often higher than the discounted 5-year rate. If the guideline turns out to
be "qualification must happen based on the 5-year posted rate" it will have an
impact on qualifications, otherwise it should have a minimal impact on the market.
- For investment properties, the new requirement will be a 20% down payment on all insured mortgages. Currently we have lenders going up to 80% on rentals without insurance. If lenders keep their polices as is then there will be some impact to the market; however, most people buying an investment property either put 20% down to avoid the high insurance premiums charged by CMHC, or the take equity out of another real estate holding to effectively put 20% down on the purchase property.
- Refinances can only be approved up to 90% LTV vs. 95% LTV. Once again I do not think this will impact the majority of consumers.
For further information you may read the full article at:
Enjoy your day!