The Canadian Government has just announced some changes to mortgage lending rules that will affect you if you are planning to buy a home in the coming months.
When your mortgage application is reviewed, the lender presently uses the 3-year posted interest rate to "qualify" you.
One of the changes announced is that lenders will no longer use the 3-year posted rate to qualify you but rather the 5-year rate and that 5-year rate is usually higher than the 3-year posted rate.
How does this really affect you?
What it essentially means is that you will now need to qualify at a higher rate, meaning that your maximum eligible purchase limit may be knocked down to a lower amount.
You might be thinking that you could just push out that amortization. Perhaps for now. The Finance Minister has not made any announcements to shorten amortization periods.......yet. I do believe that change is coming or will soon be announced. While qualifying an applicant on a 5-year rate may limit your purchase price on a 25-year amortization, you may still be able to achieve that purchase price on a 35-year amortization so how is this really helping? Its not. If buyers opt to push out their amortization to get into that more expensive home that would really only make this government change futile because taking that longer amortization is the easy way around this new rule. What good is this new rule if you can find a way around it?
Qualifying a mortgage on a 5-year rate takes effect on April 19, 2010. You have until then to obtain a mortgage commitment, with today’s mortgage rules qualifying you on a 3-year rate, and after this date, the rule changes.
You can read more from the recent National Post article:
http://www.nationalpost.com/most-popular/story.html?id=2570533
This
blog post was written by Elizabeth Blair, a Licensed Mortgage Agent with
Mortgage Edge in Richmond Hill, Ontario.
Elizabeth services mortgage clients in Mississauga and all over the
Greater Toronto area.
You
can contact Elizabeth directly by phone at
by
email at eblair@mortgageedge.ca
or
you visit her website at: www.missmortgage.ca
Elizabeth
is licensed with the Financial Services Commission of Ontario and is also a
Member of IMBA (the Independent Mortgage Brokers Association of Ontario)
www.imba.ca Lic # M08005880 Brokerage Lic # 10680
Our head office is located at: 15
Wertheim Court, Suite 210, Richmond Hill, Ontario, Canada.
