The new mortgage rules that will come into effect on April 19, 2010 have caused concern amongst potential home buyers. The new mortgage stipulations that Finance Minister Jim Flaherty presented are as follows: The new rules will require that all borrowers meet the standards for a five-year fixed-rate mortgage even if they choose a mortgage with a lower interest rate and shorter term. This initiative will help Canadians prepare for higher interest rates in the future. The rules have lowered the maximum amount Canadians can withdraw in refinancing their mortgages to 90% from 95% of the value of their homes. This will help ensure home ownership is a more effective way to save. The last amendment affects property speculators who buy places but don’t live in them. They will now have to put a minimum of 20% down, up from 5%. These changes are being implemented in order to prevent negative trends from developing that may damage an already weakened Canadian economy. As previously stated it is anticipated that interest rates are going to increase and this is a way to ensure Canadians are prepared. By implementing these new policies it will ensure that variable rate mortgages do not rise too quickly and cripple homeowner’s financially.
The Canadian Real Estate Board welcomed these amendments and was thankful that the federal government didn’t increase the minimum down payment or decrease the amortization period (the length of time in which a mortgage may be paid). The new rules should help Canadians manage their debt better and prevent the disaster which is currently sweeping the United States.
