New Canadian mortgage lending requirements.

[Jack Young]

I thought I might see a little more about the new Canadian mortgage rules and how it's effecting investors, I would imagine this is more an effect on the smaller investors but I also wanted to know how they were finding funding.

[Roy N.]

Originally posted by @Philippe Busque:

This is very annoying if you plan to refi in 2-3 years, do you guys think this could reduce the banks appraisal much if the interest rate is 5% (from 3.25 right now)?

How do you calculate this?

Rising interest rates will exert some downward pressure on valuations - but the degree will likely depend on how highly overvalued a particular market is when the rates rise.

Thinking back to a double digit mortgage rate in my youth, the primary concern was not whether the lender would lower the appraised value if rates rose significantly, but that the lender might decide I could no longer adequately service the debt.   Now, it is unlikely we will see interest rates of 16% anytime soon, but if you think rates are to continue rising, then take advantage of the current rates to pay down extra principal.

If you were to model your property and operating budget based upon the BoC posted rate; secure a variable rate mortgage at 1.5 to 2 basis points less, but make payments as though you were paying the posted rate, you would take a huge slice out of your mortgage and have a built-in hedge against further rate increases.