I am sure you have heard about the new mortgage rules coming in March. I thought I would just send out a note just in case you haven’t.
Here is the official press release from the Department of Finance http://www.fin.gc.ca/n11/11-003-eng.asp
The government has made 3 rule changes coming on March 18.
1. Amortization will be lowered from 35 years to 30 years.
2. Refinancing will be lowered to a maximum of 85% loan to value.
3. Insured Home Equity Line of Credits will be eliminated (HELOC).
Back in 2008 the government lowered the maximum amortization from 40 year to 35 years. This will be further reduced to 30 years. This will cause a mortgage payment increase on a $250,000 mortgage to go from $1060 to $1150. Not a really big difference in a monthly payment but this could lower a pre-qualified person for up to $20,000 in purchase price.
In April of last year the government lowered the refinancing 95% to 90%, this again is one of the things that is changing. This is now going to be lowered to 85%. With this being lowered, those that are looking to refinance to consolidate debt or do some investing will really have to make sure the equity is there to be able to do this. With home values lower than most would like them, this could be one that hurts some people.
CMHC or Genworth will no longer be insuring HELOC’s. This is the one change that should not affect many people. There are very few banks, if any, that were still offering the HELOC’s as a insured product. This just makes it so all HELOC’s will need to have 20% equity in the home.
Judging by the mortgage changes that put into action last year, we should see an increase in home buyers in the next couple months leading up to the mortgage changes. Like last year, if there is an offer written and accepted before the March 18 change and possession comes at the end of March, you will still be OK.
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Thanks For Reading
Scott Bourke, AMP
Dominion Lending Centres Regional Mortgage Group