Topic of Interest - New Mortgage Rules April 19
How Will The Tighter Mortgage Rules Effect You That Come Into Effect April 19, 2010
All borrowers will need to be able to meet the standards for a five-year fixed rate mortgage, even if they opt for a mortgage with a lower interest rate or shorter duration. Anyone buying a home that they won’t be living in will need a minimum down payment of 20 per cent. Canadians won’t be allowed to refinance a property more than 90 per cent of it’s value.
How do these changes differ from what is currently being done:
Borrowers are currently required to meet the standards for a three year fixed-rate. The rate difference of a three and five year rate is about ½ to 1% year fixed-rate. This could mean a $5000 to $8000 on a house that costs in the $330,000 range.
The 20 per cent down payment, for those that aren’t buying a principal residence but instead a property that they won’t be living in, is up 15%.
The refinancing limit which will be 90% ratio value of a home is being implemented to replace the current 95%.
There had also been talk that there may be a change to the 35 year amortization on a mortgage but it was left untouched.
One should take these as minimum guidelines only. If you can put more down and you have no need for the money elsewhere, then you should consider putting it down. Before finalizing an amortization period take one last look at your budget and see how much you can afford to put to your house payment each month. Next take a look at what the payments would be if you were to shorten your amortization period. Taking a 20 year over a 25 year amortization may not cost you that much.
Other tips to save $1000’s in interest and get your home paid off faster is to try to make annual lump sum payments of up to 15%, double up on payments when you can or make bi –weekly payments.
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