New CMHC Rules: Interest rate qualification
On February 16th, the government announced new parameters regarding the application of the government guarantee supporting the mortgage insurance industry, but did not stipulate the rules around qualifying interest rates. Effective April 19th, 2010, the qualifying interest rate used to assess borrower eligibility will change only for loans with an LTV greater than 80% as follows:
Fixed-Rate & Variable-Rate Mortgages:
For loans with a fixed-rate term of less than five years and for all variable-rate mortgages, regardless of the term, the qualifying interest rate is the greater of:
The benchmark rate (e.g. 5.39%)
The contract interest rate (e.g. 3.69%)
For loans with a fixed-rate term of five years or more, the qualifying interest rate is:
The contract interest rate (e.g. 3.69%)
Mortgages with Multiple Interest Rates (eg, Multi-Component Mortgages like the 50/50 Mortgage):
Each component must be qualified using the applicable criteria defined above.
CMHC defines the benchmark rate as the Chartered Bank – Conventional Mortgage Five-Year rate that is the most recent interest rate published by the Bank of Canada.
Should you have any questions related to the new mortgage rules, or need any help with your own mortgage, please feel free to contact me. With access to over 90 different lenders, I can guarantee you the best mortgage product to suit your unique needs. Call me today!
Kind regards
Jacqueline Baker
Mortgage Broker
O | 604.544.2006
C | 604.724.6982
F | 604.922.3899
