New Mortgage Changes
Mortgage Changes and Clarification

To clarify any confusion, YES you can still buy a home with a 5% downpayment; this has not changed. As well, lenders continue to offer the 5% cash-back option.

The 3 New Rules to Insured Mortgages follow:

1. 90% Maximum RefinancingPrior to the modifications, you could refinance and withdraw up to a maximum of 95% of the equity in your existing home. With maximum remortgaging lowered to 90%, you will now be required to maintain a 10% equity position.

2. 5-Year Qualifying for Lower Rate MortgagesWhether buying or refinancing, you may choose a lower interest rate product, such as a variable rate or a 1, 2 or 3-year mortgage. However, you will now have to qualify at a 5-year fixed mortgage rate.

3. 20% Downpayment for InvestmentIf you buy an income property like a duplex and you occupy one of the units, you can still buy with 5% down. If, however, you buy a property that’s non-owner occupied, for speculation and investment, you will need a minimum downpayment of 20% to obtain a government-insured mortgage.

The changes come into effect on April 19, 2010. However a number of lenders have already initiated their implementation.

Comment
On variable rate mortgages, qualifying for the 5-year fixed rate was in place even before the changes. Now this requirement simply extends to mortgages with a shorter than 5-year term, which typically have a lower rate.
Can sales be affected? More than likely, since buyers, at times, have opted for a 1, 2 or 3-year mortgage because they may not have qualified for the higher 5-year rate. On renewals, however, homeowners can more likely afford a rate change, making their payments affordable.

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