New Rule Changes Announced For Government Insured Mortgages

Insured mortgages underwritten by Canada Mortgage and Housing Corporation (CMHC) will undergo a bit of a face lift starting April 19, 2010.

Minister of Finance, Jim Flaherty, announced three policy or rule changes to the mortgage insurance program.

The first, and perhaps most significant of the changes is that a borrower’s repayment qualification will be based on the 5 year fixed mortgage rate instead of the three year rate most lenders now use.  Because longer term rates are higher over time, the lending decisions will now be factoring a higher level of conservatism into the repayment assessment.

What remains unclear on this point is the actual 5 year rate that will apply as some mortgage lenders have posted rates while others do not.

The second change impacts mortgage refinancing where additional funds are being drawn against the remaining equity of a residential property.  Up until now, you could get an insured mortgage up to 95% of the property value on a refinancing.  The new rules will drop this down to 90%.

The last change announced is the amount of leverage available under the program for non owner occupied properties acquired for the purposes of speculation.  This would primarily impact the rental market where investors can also take advantage of the government backed mortgage insurance.

But with the change, investors are now going to have to put 20% down on any purchase, maxing the amount available through a CMHC insurable mortgage to 80% of the purchase price.

Many expected the changes to be even more significant as there have been concerns that the current policies were helping to promote a housing bubble here in Canada.

If you’re looking at a higher ratio mortgage that will require mortgage insurance and would like to know how these changes may impact your particular situation, I suggest that you give me a call I will make sure that you get all your questions answered.

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About the Author Joe Walsh

I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel