How The New Mortgage Rules Affect You

by Jay Calafiore

By now, you have heard that Canada 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 widley 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 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 annoucement 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. 

So, at the present, we’ve been given about 2 months before the changes take place…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.

Feel free to call with any questions on how these changes may affect you and YOUR mortgage plans…

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January 19, 2011 at 4:24 pm

{ 3 comments… read them below or add one }

1 Michael Rapkoski January 23, 2011 at 4:10 am

Great blog Jay!

2 Jay Calafiore January 24, 2011 at 4:11 pm

Thanks Mike!

3 Pete Kolackovsky September 14, 2011 at 7:06 pm

Hey! Great post. I’m also very interested in this topic and would like to keep posted. It would be great if you checked out my Calgary based website, since we both enjoy the mortgage and housing market.

-Pete Kolackovsky

Mortgage Architects

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