There is just over one week left until the new mortgage rules come into play. These new mortgage rules come into effect on March 18, 2011.
I am sure everyone has heard about the new rules, but if you have not heard, there are 3 new mortgage rules coming.
– The maximum amortization is being lowered from 35 years to 30 years.
– Refinancing on mortgages is being lowered from 90% Loan to Value to 85%.
– All Home Equity Line of Credits will need to be conventional now, No Insured HELOC’s
You can read more about the rule changes here http://wp.me/pMt0j-2X
There is a lot of people out there that think the minimum down payment is increasing from the 5% it is currently at. This is NOT true. You can still purchase a home with 5% down. Cash back mortgages are also still available if you do not have the down payment saved.
The lowering of the amortization from 35 to 30 years will only impact a person that was looking at purchasing up to their maximum mortgage amount qualified. Going to your maximum debt ratios when you apply for a mortgage is not the best thing to do anyway. You should always use your own financial budget to figure out how much YOU want to pay for a mortgage. The bank may say you qualify to spend $1500 a month but you may only be comfortable with $1200. Always keep extra things in mind, Are you thinking of starting or adding to your family? Do you have a rainy day fund? Do you like to travel frequently? add these things to your budget.
If you were thinking of buying a home and think your window to buy closes with the mortgage rule changes on March 18th, this is not the case. You may still be able to qualify to buy that home you wanted. The difference on a mortgage of $300,000 over 35 and 30 years is only $100 per month. That is $100 less per month you will be paying to Interest! Any monthly payment savings that you get on a mortgage when you amortize it over 25 years comes off the principle that you are paying off. For example If you have a $300,000 mortgage this is how your monthly payment breaks down
35 yr amortization – $1320.64 payment $989.31 (Int) $331.33 (prin)
30 yr amortization – $1424.86 Payment $989.31 (Int) $435.55 (prin)
25 yr Amortization – $1576.43 Payment $989.31 (Int) $ 587.12 (prin)
So as you can see the saving that you are ‘saving’ is just the amount that you are not paying yourself.
So keep in mind that the world is not ending with these rule changes. There still is a very good chance at home ownership for everyone. First time home buyer? not a problem, there is still mortgage programs and rebates out there for you.
For more mortgage information or to apply online visit my webpage http://www.scottbourke.ca/how-to-apply-mortgage
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For questions send me an email at sbourke@regionalmortgage.ca
Thanks For Reading
Scott Bourke, AMP
Dominion Lending Centres Regional Mortgage Group
866/403-343-1125
