Got the following from the newsletter from CAAMP (Canadian Association of Accredited Mortgage Professionals):

“This morning, Federal Finance Minister Jim Flaherty announced prudent changes to mortgage insurance rules intended to come into force on April 19, 2010. CAAMP was actively engaged in the discussions around these changes which are as follows:

1. All borrowers must meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term;
2. The maximum amount one can withdraw in refinancing their mortgage will be reduced to 90% from the current 95% of the value of one’s home;
3. Non-owner occupied properties will require a minimum down payment of 20%.

There were no changes to down payment requirements or length of amortizations for owner-occupied residences.

CAAMP will continue to monitor developments including transition rules.”

More updates later as we follow up on new lending guidelines for borrowers.

Many people often compare mortgage rates for home purchases thinking that getting the lowest rate is the best way to save money. While this may be true, there are many times when this isn’t enough to guarantee you get the best deal. Here are three reasons why…

Reason 1:

Your long term plan and risk tolerance should determine which mortgage product is right for you. This product may or may not have the lowest rate.  For instance, there are cases where lenders will offer lower rates for insured mortgages. However, with insured mortgages, you are charged an insurance premium which is usually added to the mortgage amount. However, if you are not keeping the property for a long enough time to offset that cost, it might be better to take an uninsured mortgage with a slightly higher rate. The cost difference you will pay with the higher interest rate might still be less than what you might pay in insurance premiums.

 Another example would be, if you prefer to budget for a consistent payment and cannot handle rate fluctuations, it may be better to go with a higher fixed-rate mortgage.  If you think current rates are low enough and you will be living in your property for at least 5-years, it may be wise to also opt for a mortgage with a longer term.

Reason 2:

One of the biggest mistakes people make when they merely compare mortgage rates for home purchase is that they fail to consider important factors like prepayment options to help pay off the mortgage faster, whether secondary financing options are allowed, the pay-out penalties, or what fees are involved.  It is not enough to just compare mortgage rates for home purchase because you have to know what “clauses” the mortgage deal comes with. There may be cases where you will find a lender with the lowest rate and willing to pay for your closing costs, or even providing you with cash-backs after closing. Be wary of those types of deals. Be sure to look at the clauses and what is truly involved in signing up with them for that mortgage. If you are not sure, the best thing to do is talk to a knowledgeable mortgage broker or have your lawyer go over the mortgage documents.

Reason 3: 

Last but not least, the reason why you shouldn’t just compare mortgage rates for home purchase is because lenders change their rates all the time. Generally speaking, mortgage brokers all have the same rates from each lender. Each of those rates can change at any time. So if you ask one broker on Tuesday for a quote and the next day the rate changes, another broker may give you a different rate but it doesn’t mean the first broker gave you a higher or lower rate.  He may actually have the same rate as the second broker at that time.

These are the 3 reasons why it’s not enough to merely compare mortgage rates for home purchases. They are by no means exhaustive as every individual’s situation is unique. The mortgage rate you may qualify for is also highly dependent on your credit score among other things.  To get better mortgage deals, you need to have good credit. If you are unsure about your credit, check your credit score and see if you need to improve it to have better mortgage options.

 The best thing to do is talk to a knowledgeable mortgage broker. Make sure he/she has access to as many lenders and mortgage products as possible, and has great knowledge and expertise to match you with the right mortgage product for your needs.