My day began in the usual way, sipping coffee at my computer in preparation of the day that would follow. My phone alerted me that an email had just arrived. Nothing unusal about that, but it sounded again and again and again and... What could possibly be causing such activity? - NEW MORTGAGE RULES!
Jim Flaherty, Finance Minister announced 3 new changes to the rules for government insured (default insured) mortgages. The intent - support long term stability of the housing market and address rising household debt in Canada.
Sounds good doesn't it? But what does it mean to you?
- Lowing the maximum amount consumers can borrow when refinancing their mortgages. This change will lower the maximum mortgage amount to 85% of the appraised value of the property from the current 90%. This change will help to promote savings in homeownership and ensure that homeowners don't become overextended by using all the equity they have built up in their home when refinancing.
- Reducing the maximum amortization period for new government insured (default insured) mortgages. The maximum amortization period for all new mortgages will be reduced to 30 years from the current 35 years. This change will help reduce total borrowing costs to consumers, helping them to build up equity more quickly.
- Withdrawing government insurance backing on lines of credit secured by homes: effective April 18th.
The effective date of the first two changes will be March 18th. Applications submitted and approved by CMHC prior to March 18th will still qualify under current guidelines.
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