New Mortgage Rules Mean Less House or Less Choice for Mortgage Terms

Canada Mortgage and Housing Corporation has announced that as of April 19th home buyers will have to qualify for their mortgages at the bank’s posted 5 year rates if you are putting less than 20% down and are taking a variable rate mortgage or a term of less than 5 years. This is being done to ensure that people do not over extend themselves and end up losing their home in the future because they are forced to renew their mortgage at a higher rate. What does this mean to home buyers? You will now qualify for less of a mortgage than before or you are stuck with a five year mortgage term.

For example if the maximum amount you qualify for with a 3 year rate of 3.49% is $350K you will now only qualify for $273,674 because you have to qualify at the 5 year posted rate of 5.39%. Your interest rate will still be 3.49% but you qualify for over 20% less of a mortgage because of the new rules.

How will this effect you? What do you think it will do to real estate prices in general?