New Mortgage Rules
The announcement by Finance Minister Jim Flaherty regarding new mortgage rules will affect the real estate market in three ways as of April 19th 2010:
1. Qualifying for a mortgage - 1st time Buyers
2. Home investors
3. Re-financing your home
First time buyers are approved for a mortgage based on a 5 year mortgage rate. Before the new rules were applied a buyer was approved based on a 3 year rate. For example, the buyer could now be now approved at a rate of 5.39% rather than a 4.15% - this affects a purchasers' buying power. The purchaser may be getting a lower rate or a shorter term. However, this change will affect potential buyers who barely qualify for a mortgage in the first place. Buyers will have to pick and choose and lower their expectations if need be to purchase what they can afford.
Home Investors will have to deposit 10% more than what the current deposit is (20% now opposed to 10%). This is supposed to keep the home prices from climbing too high. Home investors may find that it is simply too difficult to invest without getting a profitable return.
Currently, Homeowners were able to re-finance their homes up to 95%. With Flaherty's new rules, a homeowner can only re-finance up to 90%. This 5% increase is supposed to assist Canadians in building the equity on their homes.