New mortgage rules come into effect in one week folks! Check out this info from Peter Majtheynji from My Mortgage Planner to find out how it could affect you….
By now, you have heard that Canada’s Finance Minister, Jim Flaherty, has initiated further changes in the mortgage industry that will take effect March 18, 2011. This is an effort to reduce the exposure consumers have to household debt, based on recent statistics.
Firstly, the maximum amortization period will decrease from 35 years to 30 years for government backed mortgages (when buyers have less than 20% down payment). This should only increase a typical monthly mortgage payment by about $35-$40 per $100,000 borrowed, when comparing a 35 to 30 year amortization.
Second, Flaherty has announced he will decrease the maximum amount you can refinance against your home, from 90% to 85%. This may impact consumers looking to consolidate debt or take equity out for investment.
Lastly, he is withdrawing government insurance on lines of credit, secured against homes – which were previously allowed up to 90% loan to value. This product is not widely used (due to the insurance premium applied to a product one may, or may not use), and as a result, should not affect the market by very much (secured credit lines will still be available to 80% LTV).
The positives out of this are that these changes may have led, and continue to lead, the Bank of Canada (BoC) to keep interest rates low for a while (today’s BoC announcement confirmed NO prime rate change, leaving Variable Rate Mortgages and Credit Lines untouched!). Also, obviously, a more responsible lending and borrowing environment.
However, some will feel this tightening may reduce financial flexibility in the short run, and potentially flatten the upcoming spring real estate market.
Anyone looking to refinance, or purchase a home should consider this short window of opportunity to firm up any plans they may have. We have yet to hear how this may or may not affect conventional mortgage lending (consumers buying or refinancing with 20% or MORE equity), but should know, and will advise, in the near future.
You can contact Peter or Andree about your mortgage and home financing options today…
Peter Majthenyi AMP
phone: (416) 236-9300 ext.11