“Here Are A Few Additional Wrinkles To Now Consider When Budgeting For A New Home Purchase or Mortgage Refinance”

In March of 2010, Canada Mortgage and Housing Insurance announced some changes to their mortgage insurance program that were designed to reduce the potential of a housing market bubble developing in Canada through our own version of the sub prime market which falls under the category of insured mortgages.

The changes to take effect on April 19, 2010, in a nut shell, are 1) changes in debt servicing assessments for mortgage requests above 80% of the value of the property and mortgage terms less than 5 years; 2) a reduction in mortgage refinancing amounts from 95% of property value to 90%, and 3) a requirement that all CMHC insured rental properties have a 20% down payment at time of purchase.

The big question that existed after the initial announcement was how would the repayment assessment work going forward.

Today, we got some further clarification.

Basically, for a new mortgage application where the mortgage amount is over 80% of the property value, the repayment assessment must now be based on the Chartered Bank Conventional 5 year mortgage rate published every monday by the Bank of Canada.

And because this published 5 year rate is typically higher than what the actual 5 year rates being issued are at any given time, the bar for qualifying for variable rate mortgages, or mortgage terms under 5 years has now been raised.

Bottom line, its now going to be much harder to qualify for a high ratio home mortgage and even harder to take advantage of variable interest rates, which are still more than 2% below the best 5 year term options.

For those of you who already have a variable rate mortgage for a predefined term, there’s nothing indicating that these recent changes will impact you’re ability to continue on with a variable rate once the present term expires even if you wouldn’t otherwise qualify for a new mortgage under the changes to the CMHC mortgage insurance program listed above.

Keep checking back for more mortgage insurance information as I will be posting any further changes or explanations that get disclosed.

And if you have any questions related to getting a new mortgage or refinancing your existing mortgage, please give me a call so I can quickly assess your options and provide the most relevant options for your consideration.

Click Here To Speak With Mortgage Broker Joe Walsh

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1. A Canadian Insured Mortgage Verus A Sub Prime Mortgage