New Canadian Mortgage Rules Unveiled Today

Today, a third round of mortgage policy reforms was outlined by our Finance Minister, Jim Flaherty.

Responding to concerns of increasing household debt, the following changes will be made:

• Amortization periods longer than 30 years will no longer qualify for government-backed mortgage insurance, which is required for buyers with less than a 20% down payment on a home. This was previously 35 years. In 2008, the period was 40 years. This comes into effect on March 18, 2011.

• The maximum amount Canadians can borrow against the value of their homes has been reduced from 90% to 85%. This will affect refinancing and those wishing to borrow against the equity in their home. This will come into effect on March 18, 2011.

• HELOCS - Home Equity Lines of Credit will no longer be backed by the government as of April 18, 2011. Expect a change in attitude at your local bank.

Note that if you obtain a rate hold from a mortgage broker (use one! I can recommend a good broker to you, just ask) or bank, you can get in under the less restrictive older rules, even after March 18.

For example, if you get a 60 day rate hold as of March 1, you can close on a home purchase up to May 1 and still qualify under the old rules. 

This will stoke the spring market considerably. We experienced this last spring when mortgage rules were also tightened. Expect a competitive environment as people rally to get into their new mortgages before the changes come into effect.

It will get especially busy mid February to early May. January may be a good time to get things done, before the big rush.

If you need more information, or would like to know how this may affect your personal situation, please don't hesitate to call or email me. I'm happy to help.

Read more about it here.