Changes to mortgage rules were much in the news this week and not necessarily well explained.  3 main changes, which only time will tell if necessary or not. 

If you are buying an investment property, i.e. non-owner occupied, non-family occupied, then your minimum down payment must now be 20%.  I would love to find stats for the number of investment properties purchased in each of the last 3 to 5 years to see how the numbers increased year over year for high ratio deals – for financing over 80%.  I know Flaherty proposed this change to combat real estate speculation, simply not aware this was a problem. 

If you are refinancing, taking any equity out of your home, then the max amount after April 19th is 90% of the value of your home.  Before that time can still refinance up to 95% of the value of your home.  Many Americans were using the equity in their homes as ATMs.  Canadians were not to the same extent, but it is a prudent move should real estate prices decline.  No one wants to see home owners in a negative equity position. 

Finally, all mortgagors will, after April 19, have to qualify at the 5 year fixed rate.  Smart move for those currently negotiating their mortgages as rates will be much higher in 2 to 5 years time.  A lot of mortgage brokers have been prudent in this regard and have shown their customers what a higher rate means in terms of monthly payments and reduced cash flow.  I stay in touch with customers so any increases don’t come as a shock.  If you are closing on new construction or doing a self build and have a long term rate guarantee that is based on the bank’s posted less so many points, then you could run into problems should the current qualification criteria not be grandfathered in.  Feds don’t want anyone to face negative consequences so presume once the details are rolled out current rules surrounding qualification and affordability for existing deals will be allowed .  However, you will probably face a larger mortgage payment as rates are forecast to be higher come the fall.  Hoping you are working with someone who has already qualified you based on a higher mortgage amount so increases won’t adversely affect your monthly budget.   If not feel free to run your budget and mortgage terms by me.