Ottawa has toughened on some mortgage rules! or has it?
This all depends on who you talk to. If you talk to the general consumer who just read Flaherty’s announcement it can be a little scary (it’s had my phone ringing with inquiries to try and beat the new rules.)
Personally I think the new “tightening” will be great.
1. all mortgages qualified on the 5 year rate
There still hasn’t been an announcement if it will be a lenders posted or discounted rate…when I know, you’ll know!
Currently regardless of the term you choose a lender will qualify you based on a 3 yr or 5 year rate. So in the end qualification will really only change by 0.50% to 1% difference and this makes a small difference in the household income needed to qualify, to the tune of approximately $8,000.
This does not effect those who currently have an insured mortgage (greater than 80% loan to value) If you choose to refinance in the future and want to extend the amortization you may be affected. Speaking with an Accredited Mortgage Professional is your best way to get your questions answered in this case.
Simply, the intended purpose of the new qualification guideline is to prepare Canadians for higher interest rates and to guard against the temptation to overextend oneself simply because today’s mortgage interest rates are so low.
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