Finance minster, Jim Flaherty announced tighter lending standards for mortgages recently. His purpose? To prevent homeowners from getting into financial difficulty when mortgage rates rise.

After consulting with major Canadian lenders, he unveiled the plan with three main components:

All borrowers will need to qualify for a five-year fixed mortgage rate, regardless of whether they choose a shorter term at a lower rate. This will ensure borrowers can make higher payments as interest rates rise.
The maximum amount when refinancing a mortgage will be lowered to 90 per cent of the value of the home, from 95 per cent.
A minimum 20 per cent down payment is now required to qualify for CMHC insurance for non-owner-occuped properties purchased as an investment.
These new rules will come into effect April 19, 2010

What hasn't changed is, you can still buy a home with a 5 per cent down payment.

What does this mean? If you are thinking of purchasing a home, you can still have only 5% downpayment, but effective April 19, 2010 you will have to qualify (your income) for your mortgage amount based on the 5 year fixed mortgage currently 5.39% average vs. a lower rate of anywhere from 1.9% - 4% available in the market as variable and open mortgages.

The net effect is that you may need to do one of the following:

1. increase your downpayment

2. increase your income

3. lower the budget for the house

Investors will now require a 20% downpayment to purchase property.

If you would like further information to suit your unique situation,

please call me at 905 897 9555 or you can email me at bchung@sutton.com