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Wednesday, March 31, 2010

FYI: Regulatory Changes for Mortgage Products

FYI: Regulatory Changes for Mortgage Products

Subject: FYI: Regulatory Changes for Mortgage Products – Update to Qualifying Rate

SUMMARY:

On February 16, 2010, the Government of Canada announced a series of regulatory changes to support the long-term stability of Canada’s housing market. The Government has now provided the following details in relation to these changes.

Effective April 19, 2010, Qualifying Interest Rates guidelines will change as follows:

  • Fixed Rate Mortgages of terms less than 5 years and all Variable Interest Rate Mortgages: Applications will be adjudicated based on the greater of the 5 Year Bank of Canada Benchmark Rate**, or the actual customer rate (inclusive of any customer discretion).
  • Fixed Rate Mortgages of terms 5 years or greater: Applications will be adjudicated based on the actual customer rate.
  • This change applies to both conventional and insured mortgages.

ADDITIONAL INFORMATION:

  • The three key changes associated with this announcement are:
    1. Borrowers will need to be able to afford a five-year fixed rate mortgage, even if they choose a mortgage with a shorter duration.
    2. Investors, who want to buy a home that they don't plan to live in, will have to make a minimum down payment of 20%.
    3. Canadian home owners will only be able to withdraw 90% of the value of their homes in a refinancing, down from 95%.