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
**The Bank of Canada Benchmark Rate is defined as the Chartered Bank – Conventional Mortgage 5-year Mortgage rate, published by the Bank of Canada each Monday, and can be found at http://www.bankofcanada.ca/en/rates/interest-look.html
3 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%.
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