Rules Getting Stricter for Home Buyers

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Finance Minister Jim Flaherty is tightening mortgage rules in order to crack down on speculators and discourage homeowners from taking on too much debt.

This is the attempt made to responding on the growing concerns that Canada’s housing market is getting too hot, although he stresses that there is no such bubble in Canada’s real estate market yet.

Flaherty says that all borrowers will need to meet stiffer criteria in order to get a mortgage. In order to qualify for an insured mortgage, borrowers would have to meet standards for a fire year old fixed rate mortgage, which is up from the current standard of the three years fixed rate mortgage.

Flaherty also noted that he will be increasing the down payment that borrowers must pay for speculative investments.

If prospective home buyers want to purchase a property in which they will not be living in themselves, then there will have to come up with around 20% down payment.

Flaherty is not stopping here; he is imposing tighter restrictions on how much money people can borrow against their houses. The limit was 95% on how much you could borrow of the value of your property, however it will not be at 90%.

These new rules are expected to come into effect as of April 19th.

The Bank of Canada has been warning for moneys that homeowners should ensure that they can absorb an increase in their floating rate mortgages once rates begin to rise, which could be as early as summer of this year.

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