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New Mortgage Rules: How will they effect me?

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On January 17th, 2011, the Canadian Finance Minister announced New Mortgage Rules. First and foremost, these new mortgage rules effect only ‘High-Ratio” Mortgages….in other words, home purchases with less than 20% down payment.  In a nutshell, the new rules are:

1)  The maximum mortgage amortization period has been decreased to 30 years (down from 35 years).

2)  When refinancing your home, the maximum amount  you can borrow has been reduced from 90% to 85% of the home’s value

3)  CMHC will no longer insure home equity lines of credit (HELOCs)

It should be noted that these new rules are NOT retroactive.  In other words, if you have a 35-year mortgage, you will NOT be required to switch to a short amortization period.  Even when you renew your mortgage, provided that you remain with the same lender, you can continue with the 35-year term.

What will be the long term effect of these new mortgage rules?

In the long term, a shorter period will mean that home owners will pay less interest on their homes….a key reason why these new mortgage rules were put into effect in the first place.  Also, by only allowing refinancing of 85% of the home’s value, the government is trying to prevent home-owners from over-extending themselves, a little ‘big-brotherish’, but after the global financial melt down, most people would say this is a prudent step.

Short term effects?

If you’re thinking of purchasing a house or condo, please call me anytime to discuss these new mortgage rules and any other home-buying issues.  Bo Kauffmann 333-2202

Related articles

• Canada Introduces Strict Mortgage Rules to Control Mortgage Debt (bokauffmann.com)

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