Mortgage Insurance Rule Announcement

This morning, Federal Finance Minister Jim Flaherty announced prudent changes to mortgage insurance rules intended to come into force on April 19, 2010. They are as follows:

1. All borrowers must meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term;

2. The maximum amount one can withdraw in refinancing their mortgage will be reduced to 90% from the current 95% of the value of one's home;

3. Non-owner occupied properties will require a minimum down payment of 20%.

There were no changes to down payment requirements or length of amortizations for owner-occupied residences.

Warning: Ottawa may be planning to make it harder for you to get a mortgage.

Thanks to historically low interest rates and a recovering economy, Canadians are buying homes at a record pace. Of course, this is great news for the housing industry and overall economy, but the federal government is sending signals that it would like Canadians to proceed with caution.


The Bank of Canada has already announced that it will likely start raising interest rates by mid 2010. Within a couple of years, mortgage rates could be as much as one or two percentage points higher. What worries the government is that some of today’s home buyers are taking on mortgages they can just barely afford, and when rates start rising, payments may be unmanageable.


To encourage buyers not to get in over their heads, the government is hinting that it may take steps to cool down the housing market, if necessary. Possible actions being discussed include increasing the size of the down payment (currently at 5%) and/or reducing the maximum allowed amortization (currently at 35 years). Both of these steps could potentially cut many homebuyers out of the market. I can help you make sure you will NOT have payments that may be unmanageable.


If you’re considering buying in the next year, you may want to act sooner rather than later. Buying now means taking advantage of record low interest rates, a manageable down payment and a more flexible amortization. If you wait too long, all of these advantages may be lost and home ownership could suddenly be out of reach.


As your mortgage advisor, I’d be happy to sit down with you, explain the situation, analyze your needs and present you with an affordable plan, whether you’re buying for the first time, renewing or refinancing. Please talk to me today before Ottawa closes the door!