Canadian Finance Minister Jim Flaherty Announces New Rules for Mortgages Backed By Government Insurance.
Buoyed by rising incomes, low interest rates, relatively low housing prices and a growing population, Canada's housing market is active and relatively stable.
Mortgage defaults are also very low in Canada relative to the situation we have been seeing in the USA.
To maintain healthy
economic conditions and prevent housing market developments from causing instability, the Honourable Jim Flaherty, Canada's Minister of Finance, announced changes to those mortgages backed by government insurance on Tuesday.
Buoyed by rising incomes, low interest rates, relatively low housing prices and a growing population, Canada's housing market is active and relatively stable.
Mortgage defaults are also very low in Canada relative to the situation we have been seeing in the USA.
To maintain healthy
economic conditions and prevent housing market developments from causing instability, the Honourable Jim Flaherty, Canada's Minister of Finance, announced changes to those mortgages backed by government insurance on Tuesday.In giving reasons for the changes, which are to take effect on April 19th, Minister Flaherty stated,
"Canada's housing market is healthy, stable and supported by our country's solid economic fundamentals,however, a key lesson of the global financial crisis is that early policy action can help prevent negative trends from developing."
Mortgages affected are those which require government backed mortgage insurance and are generally those where the buyer gives less than a 20% downpayment when buying a property.
Mortgages affected are those which require government backed mortgage insurance and are generally those where the buyer gives less than a 20% downpayment when buying a property.
The changes are summarized as follows:
Fortunately the 35 year amortization option will remain the same for mortgages backed by government insurance, as will the minimum downpayment requirement of 5% (for owner occupied properties).
- Homebuyers will have to qualify for the 5 year mortgage term interest rate. This will apply even if the buyer plans to go with the variable rate (which currently hovers around the 2.25% rate).This will not have too great of an impact on the housing market since the majority of lenders were already making sure borrowers qualified for the 3 year rate.The small jump to the 5 year rate will not be significant enough to cause noticeable change to housing prices.
Additionally, 86% of the mortgages taken out in 2009 were fixed
rate with 70% of them being 5 year term. - Investors and speculators who buy property to flip or to generate income (non owner-occupied properties), will have to put a minimum of 20% down, rather than the current 5%.
This may not affect all buyers who borrow for investment purposes, as not all lenders require their clients to have mortgage insurance if they are putting 20% down. - The third change will affect existing homeowners.
As of April 19th, 2010, homeowners will only be allowed to refinance 90% of the value in their home, rather than the current allowable limit of 95%.
Fortunately the 35 year amortization option will remain the same for mortgages backed by government insurance, as will the minimum downpayment requirement of 5% (for owner occupied properties).
©2010JoSmith
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Jo-Anne Smith, the author of this article, is a REALTOR® with Brekland Realty Group, Oakville, Ontario and welcomes your real estate inquiries. To contact her, visit www.oakville-burlingtonhomes.com |
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Jo-Anne Smith, the author of this article, is a REALTOR® with Your Choice Realty , Mississauga, Ontario and welcomes your real estate inquiries. To contact her, visit www.oakville-burlingtonhomes.com |
Jo
You have a pretty great Finance Minister; I like it when people are really pro-active and take care of the public.
Jo - There are those that see this as an indicator that interest rates will soon be on the rise here in Canada.
Hi Jo,
Interesting info. I'm suprised that your had 95% non-owner occupied loans.
Jo,
Well, it's not news to me!
But, I think it's very important that you posted it on your blog.
I posted the same, not the first, I followed Pam.
However, I think it is important to have it available for public consumption. Your followers will go to your site and will be pleased to see the information.
Yours was much better written than mine. This prompts me to rewrite my own before posting it on my website.
While it might appear here that there is a little duplication, this site is searchable by consumers and that's really the reason for it.
So, I suggest you move yours up to featured status here.
Brian
Tom,
I think that's the best way to do things...take care of things before they get out of hand. Like you always say "I'd rather let you down now than let you down later..."
Jo
Kathy,
I think they'll begin to rise slightly sometime in late summer.....
Jo
Lynda,
It was great for speculators.....for awhile. Although the past few years have not worked out the way they had hoped.
Jo
Brian,
Thanks for the compliment.....I don't like to feature my own posts though when others have written the same thing...so perhaps I'll feature yours!
Jo
Jo,
No, feature Pam's.
She was first.
Brian
Jo...what a different world than the one I live in as a Colorado Springs Mortgage Lender.