Thursday, October 28, 2021 02:18

Are You Ready For Mortgage Rule Changes?

Finance Minister Jim Flaherty announced early this year that the current government would again be changing regulations for CMHC insured mortgages.

Citing the runaway personal debt levels of Canadians, it was determined that limited mortgage options was the best way to curtail personal debt.
I would have much rather seen changes to consumer debt legislation – by way of changes to credit card lending.

Lets take a look at what these changes are!

These changes will take effect March 18th 2011. Any mortgage application submitted before this date will still be accepted under the current guidelines. If you want to refinance to 90% or have a 35 year amortization then get your application in ASAP!

1. The maximum amortization will now be 30 years as opposed to 35 years. The payment on a 30 year amortized mortgage assuming a 4.00% interest rate is $34.72 higher for every $100,000 of mortgage as opposed to a 35 year amortization.

My personal take on this change is that removing someone’s ability to choose a 35 year amortization if they are highly qualified is inappropriate. Often I will underwrite a client at 35 year amortization and set them up with payments that give them a much lower actual amortization. This is great for self employed people or first time home buyers. It gives them the ability if they need to, to back off their payments and go back to the 35 year amortization should they need the extra cash flow.

2.  Canadians can now only refinance up to 85% Loan-To-Value of their home. This is a decrease in 5% of available equity to have access to.

If your home is worth $400,000 then this will decrease the total equity you can use by $20,000.  Ultimately Canadians who need this money will have to turn to high interest unsecured loans which are much more detrimental than low interest mortgages.

3. CMHC will no longer insure HELOCS (Home Equity Line of Credit).

This change will thin out the market for HELOC’s but there are enough lenders offering HELOC’s who do not use CMHC so this shouldn’t have too much of an impact.

Remember, these changes are for CMHC insured mortgages. If your lender is not insuring the mortgage then they can use their discretion as to how to implement the changes to amortization.

Edit: It has been brought up several times that you can no longer buy a home with 5% down. This is incorrect and 95% home purchases are still perfectly legit – as long as a 30 year amortization is acceptable by you.


John Shearer