New Mortgage Rules, How Does That Affect Me?

On Tuesday February  16, 2010, Finance Minister Jim Flaherty announced three rule changes to take effect on April 19, 2010.

All mortgage borrowers must qualify using at least a 5 year term. This is a new rule that will not effect a lot of people purchasing homes today. majority of people are going with the 5 year term right now. but if you are looking at a variable rate or a short-term (1-4 year) be prepared to have to qualify using the 5 year rate. this is put in to help people when the mortgage renews. The rates right now are at historical lows, so chances are the rates when your mortgage matures is not going to be as attractive.

Refinance to 90% Loan To Value Maximum. Currently you are able to refinance your home up to 95% of its value. Refinancing has been a popular option the last year and a half with the historical low rates. But, as some of the values have dropped, this could put some people in a tight spot with negative equity in their homes. This rule will  help to assure that your home will maintain value should you have to refinance your home.

20% Down payment required on Government Backed Rental Or Speculative Properties. Currently you can purchase a mortgage on a rental property with as little as 5% down. To do This however, you do have to show a very strong Credit history, Income, and financial strength. Increasing this will make it tougher for people to get into their first rental property.

A couple of the things they were talking about changing that they DID NOT change are:

– Increasing the minimum down payment on all properties from 5% to 10%.

– Reducing the amortization allowed from 35 years to 30 years.

One thing to keep in mind, when they made changes to the mortgage rules last time not all banks waited until the deadline to change to these rules. Look for some banks to start changing their rules in March.

If you have any questions about these rule changes please email me at

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