Untangling the New Mortgage Rules

The Federal Government has made two recent changes to the eligibility rules for government-backed insured mortgages:Effective October 17, all borrowers seeking high ratio (less than 20% down payment) mortgages must qualify based upon the Bank of Canada’s five year fixed posted rate (also known as the ‘Mortgage Qualification Rate’ or MQR). Presently the MQR is 4.64%, or roughly double the best available five year fixed rate Effective November 30, all low ratio (more than 20% down payment) mortgages that have government-backed insurance will be subject to the same eligibility requirements as high ratio mortgages. The impact of the first change is simple but painful: buyers with less than 20% down will have to qualify as if they were paying the MQR, even though they can negotiate a much lower rate. The maximum price they can afford is, therefore, significantly reduced.The second change is less well understood. Most people don’t realize that about 35% of low ratio mortgages are already being insured by the banks using portfolio insurance.

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Untangling the New Mortgage Rules

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