The Government of Canada made some changes to mortgage financing this past spring and the spring of 2010. One of these changes was to ensure people who take a variable rate can handle their payments when rates go up. In order to do this they implemented something called a "Qualifying rate. What this means is if someone takes a term less than a 5 year fixed rate or a Variable rate mortgage they must qualify at a higher rate. Currently that qualifying rate is about 5.29% This will affect your borrowing capacity as your payments will show higher when calculating your debt capacity. In comparison a Variable rate mortgage is currently about 2.7
So keep in mind when you're considering taking a Variable rate mortgage or anything less than a 5 year fixed term:
1. Your actual mortgage payments are usually based on the rate you are quoted (not the qualifying rate)
2. Most lenders, including RBC, only implement this qualifying rate and process when the loan to value is less then 80% i.e. you are putting down less than 20% of your own funds.
In conclusion what this means is, for the most part, this change will affect someone with less than a 20% down payment and have minimal to no affect for someone who has more than 20%.
For information on the other changes as far as down payment minimums and amortization maximums please do not hesitate to contact myself or your trusted mortgage advisor.
Tony Marchigiano | Mortgage Specialist - Mortgage Sales BC Region, RBC Royal Bank | Royal Bank of Canada | T. 604-505-7109 | F. 778-737-0054