Durham Region Real Estate Blog

Have you heard?

Yesterday morning the Finance Minister, Jim Flaherty announced tighter mortgage lending conditions, effective April 19, 2010, with the intent to protect borrrowers from “overborrowing” and improve their ability to manage their debt wisely in the event that interest rates rise.

The key points were as follows:

Must Qualify at 5yr Rate
As of April 10th, to be approved for a CMHC insured mortgage, potential borrowers must be able to service CMHC’s debt service ratio requirements* at the lender’s “posted” 5-yr fixed mortgage rate, regardless of the term of the mortgage they eventually book.  Currently, the qualification, is based on the lenders 3-yr posted fixed rate.

Though rates vary from lender to lender, 5yr mortgage rates are approximately 1% higher than 3yr rates at the present time.

Maximum Home Refinancing Decreased
Homeowners can presently refinance their home to a maximum of 95% per cent of the appraised value of the property.

Under the new legislation the limit will be decreased to 90% of the loan to value ratio.

Minimum Down Payment For Non-Owner-Occupied Property
CMHC insured mortgages for rental/income properties will be limited to 80% of the lower of the purchase price or appraised value of a rental property.  CMHC presently insures up to 95% of the price of a residential property purchased as an investment.

Owner-occupied residential properties with rental income (e.g. duplex) will still be able to be bought with a 5 per cent down payment.

Note that lenders may put these changes into effect at their own discretion before April 19, 2010.

*Gross Debt Service (GDS) ratio — carrying costs of the home, including the mortgage payment, taxes and heating costs, divided by borrower’s income.

GDS should not exceed 32% of gross income.

*Total Debt Service (TDS) ratio — carrying costs of the home plus all other debt payments divided by borrower’s income.

TDS should not exceed 40% of gross income.

Canada’s lending policies have been strong and conservative, unlike those policies in the United States. This is a big part of the reason why we haven’t fallen into a deep recession like the U.S. did.

So, it might be time to start to look for a new home, while you can still qualify at the current, lower three year mortgage rate. And if you’re looking for a great investment property, you may want to start the look now, when you can still finance up to 95%. With some great buys out there in the Durham Region, now is a great time to get into the income property market!