Hello all,
Last week I had the pleasure to sit down with mortgage expert Shab Rajabzadeh license # M08008960 to discuss the new mortgage policies being implemented by the Federal government. I asked Shab what the changes are and his opinion on how this will impact the real estate market.
Shab outlined 3 key changes in policy:
The first new policy will require that all borrowers meet the standards of a five-year fixed-rate mortgage, even if they choose a variable mortgage with a lower rate or a shorter term.
What does this mean to you?
What this means is that there are going to be higher standards on mortgage qualifications. You will need to qualify for a mortgage that has a higher rate even though you can obtain a lower rate.
The second new policy would lower the maximum a Mortgagee can withdraw when refinancing their Mortgages to 90 percent of the value of their home, from 95 percent.
What does this mean to you?
You have to leave a minimum of 10% equity in your property if you decide to refinance. This translates into a more secure real estate market with fewer speculators.
Finally, Ottawa will now require a minimum 20 percent down payment to qualify for CMHC insurance for non-owner-occupied properties purchased as an investment. This policy is more targeted towards real estate speculators who own multiple properties beyond their primary residence.
What this means for you?
In my opinion this rule is going to have a large impact on speculators and investors looking to leverage properties with minimum monetary investment. Shab said that in his opinion this will have an impact on the buyer pool in the real estate market. This policy will safeguard the banks and CMHC from risky lending that lead to disastrous results in the United States.
Overall, we both agreed these rules are going to dampen the real estate market by restricting the # of buyers that are purchasing in a risky manner. Although this may mean fewer sales in the short term, these decisions are designed to safeguard the Canadian real estate market from experiencing what the United States did a couple years ago.
If you are interested in receiving professional lending advice you can contact Shab at shab@rajabzadeh.ca. For a free no obligation consultation with me and buyers or sellers DVD fill in the form on the bottom of the page.
Live with Passion!
Frank
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