In February, the federal government introduced new measures to strengthen housing financing. The new requirements for government-backed insured mortgages include:

• All borrowers are required to meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term.

• The maximum amount Canadians can withdraw in refinancing their mortgages has been lowered to 90 per cent from 95 per cent of the value of their homes.

• A minimum down payment of 20 per cent is required for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation.

“While we do not believe that Canada faces a housing bubble, we fully support the Minister’s actions,” said Jane Yuen, Senior Mortgages, Bank of Montreal. “BMO has mortgage specialists that will help you stress test your budget using a mortgage payment based on a higher interest rate. “

Yuen recommends these tips for homeowners and prospective homeowners:

• Consider a shorter amortization  

- The shorter the amortization, the less you pay in interest.

ª Make a larger downpayment  

- If you can provide a bigger downpayment, it’s a great way to help you pay less interest over the life of your mortgage.  Consider a minimum 10 per cent downpayment

• Make sure you can afford what you signed-up for  

- Stress test your financial budget using a mortgage payment based on a higher interest rate.

ª Make pre-payments when you can  

- Pay weekly or bi-weekly instead of monthly and take advantage prepayment privileges.

• Always make sure you save up for a rainy day  

- If you’re up to your maximum in debt, you may not be well prepared for the leaky roof along the way

• Think carefully about fixed vs. variable

- While variable rates mortgages have been a winning strategy over the long-term, fixed rate mortgages come with the peace of mind from being insulated against rate increases and knowing how much of your mortgage you will have paid down at the end of your term

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