New mortgage rules quickly approaching
At midnight, March 17, 2011, Canadians will no longer be able to qualify for CMHC High Ratio Insured Mortgages with a 35-Year Amortization.
Effective on March 18th, 2011, Canadians with less than 20% down payment will have to qualify for their CMHC Insured Mortgages with a maximum 30-Year Amortization.
Since Finance Minister Jim Flaherty announced new Canadian mortgage rules that will be used in an effort to “protect the stability of the economy”, we have seen a bit of a buying frenzy in the “First-Time Buyer” category in parts of Greater Vancouver, before the new rules kick in.
These changes consist of the following:
- Amortization is reduced to 30 years from 35 years.
- Refinances will only be up to 85% of the home value compared to the previous 90% of the home value.
- Government will withdraw insurance backing for home equity lines of credit.
How will this affect Canadian home buyers?
The first rule change is really the only one with any impact on new home buyers. With the new stricter rules, qualifying for a mortgage will be more difficult-especially for first time home buyers as they will not have the option of the extra 5 years amortization that they have had in the past. Without that extra 5 years, monthly payments will go up which could force buyers to settle for less house in order to be able to make the payments.
The new rules go into effect on March 18, 2011 so if you are one of the many wanting to take advantage of the current rules, you have until midnight March 17, 2011 to do so!