The federal government made an announcement this week about the upcoming changes to the mortgage lending market in Canada. This measure was taken to counter any overuse of the credit market and lending guidelines.
Many Canadians find themselves in a position where they need to take out equity in their homes to pay off debt or take care of other money concerns. This is not a bad move generally but it can be if all the equity is taken from the home to do it. The Finance Minister has decided that this should be scaled back slightly to protect the Canadian homeowner from overextending themselves and having no options if their situation should worsen.
In layman’s terms, here are the new mortgage rules for Canadian borrowers:
- All borrowers must qualify for a mortgage based on a 5-year fixed rate. If they decide to take a variable rate mortgage or even a 2-year fixed term, they will still need to qualify based on the 5-year fixed rate.
- Refinancing a home is still an option for all homeowners who qualify but you will now only be able to take out a maximum of 90% of the value of your home.
- If you are buying a home for revenue purposes, not to live in yourself, you will be required to put more money down (20% minimum now).
Everyone has their opinions about this topic and what they think should be done. CanEquity is, as always, neutral in our thoughts and opinions. We believe that the market has stabilized in Canada and that the recession is in our rear view mirror. No matter what decisions are made by the Federal Government and our lender partners, we will always strive to find the best product for our clients.
We feel that this is but a minor hiccup in the financial road and it should not deter Canadians from wanting to purchase a home or refinance their existing home. This new rule has been implemented by the Federal Government to maintain Canada’s secure and financially stable economy. We are available to answer any questions you may have.