Some of you may have heard that our Finance Minister Jim Flaherty has just announced a few changes to our mortgage rules. They will take affect in 60 days:
1) Maximum mortgage amortization will go from 35 years down to 30 years. (the difference works out to an extra $30 more per month for every $100,000 borrowed)
2) The maximum you can refinance will go down from 90% to 85% of the value of the home
3) CMHC will no longer support Home Equity Lines of Credit (if a client wants a line of credit to purchase, they must have 20% for down payment)
The first rule change may cause your clients to ‘act’ sooner rather than later, especially if they are interested in the 35 year amortization option.
The other 2 will likely have minimal impact as most clients refinance up to 75 or 80% so they won't have to pay CMHC premiums, and most clients do not qualify for CMHC lines of credit as the qualifications are very strict.
It is speculated that we will begin to see more ‘tightening’ of mortgage rules in the next few months as rates are forecasted to increase & we ( Canada ) try not to end up like the US .
Here is net impact of the first change a client with 90K income that could qualify for 415K with 5 % down, Now the same client will qualify for 397K, another way to look at it is that 4K more in income would be needed to qualify for 415K purchase price. THIS IS EFFECTIVE AS OF MARCH 18 for Mortgages and April 18 for Line of credit.
Here is the link to the official change: http://www.fin.gc.ca/n11/11-003-eng.aspWayne Marks TD - Mortgage Specialist
Raja Paul TD- Mortgage Specialist
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