Must Qualify for a 5-Year Fixed Rate
Ben Schmidt of www.benschmidt.tv, video blogs about the new changes taking affect on April 19, 2010, in the lending institutions across Canada. They've made three major changes: (1) You now must qualify for a mortgage at the 5 year fixed rate, (2) you can only refinance your home up to 90% of house value, down from 95%, and (3) you now must have a 20% down payment when purchasing a non-owner occupied property such as a 2-4 unit investment property.
We'll talk about the first change taking affect. Lets say you go into a bank, as of April 19 of this year, and you meet with a mortgage specialist to talk about purchasing a home. You used to be able to apply for a mortgage, for example, at a 3 year variable rate. No longer. When qualifying for a home mortgage, you need to be able to afford the 5 year fixed rate. Be assured though, you can select to have any other mortgage option the bank offers, including that 3 year variable interest rate. But, when you qualify for the loan, you must show that you could afford the 5 year fixed rate.
It's a preventative measure. We don't want people purchasing a home, just because they can afford the lowest rate possible. Rates will go up in the next year to two, as they are at historic lows. It would be a terrible thing, for a young buyer to purchaser a home, and a year latter, not be able to afford the new higher interest rate. It's a great thing, they've introduced, and it will limit the amount of people foreclosing on homes.
If you have any questions you can always email me at ben.schmidt@me.com or leave your comments here.