Stricter Mortgage Requirements Intended to Protect Consumers

Finance Minister Jim Flaherty has announced new rules that will tighten up requirements for lenders approving mortgages.  The intent of the changes is, in part, to protect borrowers taking out variable rate mortgages while interest rates are low but who may be unable to make their payments when rates increase.

The new rules are expected to include the following changes with respect to government-backed insured mortgages:

• A requirement that all borrowers, regardless of the mortgage terms they are seeking, meet the standards required for a five year, fixed rate mortgage;
• A reduction of the amount that can be withdrawn when refinancing a mortgage from 95% to 90% of the value of a home; and
• An increase in the minimum down payment required for a non-owner-occupied speculative purchase to 20% if it is protected by government-backed mortgage insurance.

It is anticipated that these changes will come into force on April 19, 2010.

The Department of Finance’s press release can be found online at: http://www.fin.gc.ca/n10/10-011-eng.asp.

Please contact Una Gabie at (250)869-1230 or gabie@pushormitchell.com if you have any questions about your real estate needs.