On January 17th, 2011, our Canadian government announced changes to the mortgage rules for government-backed CMHC insured mortgages, which will result in a tightening of credit for home purchasers and owners. Details in the report indicate the following things to look out for:
Three changes - which may affect you if you are a buyer or a homeowner:
1.) the maximum amortization period for new government-backed insured mortgages will be reduced from the current 35 to 30 years.
2.) the maximum amount Canadians can borrow to refinance their mortgages will be lowered from the current 90% per cent to 85%.
3.) The government will withdraw its insurance backing on lines of credit secured on homes, such as home equity lines of credit. (not in force until April 18, 2011)
These changes will take effect on March 18, 2011. Overall, although the changes will slow the market a little, we are not forecasting any drastic effect. The one change which will have the greatest impact is the shorter amortization period, as it reduces your borrowing power if you are a buyer. The greatest impact of the shorter amortization will be upon first time buyers. Lenders are advising that the current longer amortization period (35 years) will be still be available for closings after March 18th, including long closings of new construction condos, as long as the Agreement of Purchase and Sale is dated before March 18, 2011.
What should you do?
If you are in the process of buying right now, or are considering refinancing your home, it is probably a good idea to speak to your mortgage professional as soon as possible. If you have any questions about these changes, feel free to contact me, I work with several top mortgage experts on a daily basis, and we are here to help!
