CMHC Changes Jan 18 2011

Flaherty Announces Changes to the Mortgage Rules. Effective March 18th, getting a mortgage in Canada will become a little more difficult. Almost 12 months after announcing the previous reductions, two more rule changes are coming our way. The changes are only applicable to loans greater than 80% of value, that fall under the government back mortgage program through CMHC, Genworth and Canada Guaranty. There are 3 significant changes to the rules: 1. The maximum amortization for mortgage financing is being reduced from 35 to 30 years 2. Maximum loan amount to refinance your home is being reduced from 90% of value to 85% of value. 3. HELOC products will no longer be available through the government programs. Backing of HELOC products will be removed April 18th These changes are being made in an effort to control the household debt levels in Canada. The changes will lead to reduction in prices in most markets as less First Time Homebuyers will qualify for the financing. Keep in mind though, the reduction in amortization is not as significant as one would expect. On a $300000 mortgage with a 5 year fixed rate, the amortization reduction will increase the monthly payment by $104 per month. The translates into approximately $4000 per year additional income needed to qualify. This is not overly significant but will affect some potential homeowners. Also remember, that for clients with good credit histories, the potential to qualify with higher debt service ratios is also possible ...



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