January 17, 2011
New Mortgage Rules to take effect March 18, 2011
This morning the federal government announced mortgage rule changes. The reason? This measure is intended to rein in consumer debt and protect the housing market and the broader economy of our marketplace.
The new measures:
- Reduce the maximum amortization period to 30 years from 35 years for new government-backed insured mortgages with loan-to-value ratios of more than 80 per cent. This will significantly reduce the total interest payments Canadian families make on their mortgages, allow Canadian families to build up equity in their homes more quickly, and help Canadians pay off their mortgages before they retire.
- Lower the maximum amount Canadians can borrow in refinancing their mortgages to 85 per cent from 90 per cent of the value of their homes. This will promote saving through home ownership and limit the repackaging of consumer debt into mortgages guaranteed by taxpayers.
Withdraw government insurance backing on lines of credit secured by homes, such as home equity lines of credit, or HELOCs. This will ensure that risks associated with consumer debt products used to borrow funds unrelated to house purchases are managed by the financial institutions and not borne by taxpayers.
The adjustments to the mortgage insurance guarantee framework will come into force on March 18, 2011. The withdrawal of government insurance backing on lines of credit secured by homes will come into force on April 18, 2011.
If you have been prequalified for a mortgage and these rules impact you please contact your mortgage broker. If you are considering a purchase this year, it is best to first contact your mortgage broker to get a good understanding of your qualifications and how the various new rules may impact you. If you need help getting started or don't already have a mortgage broker or financial advise please contact me
and I will direct you to the information you need.
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