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17 Jan

Government of Canada Changes Mortgage Rules (again)


Posted by: Sean Binkley

Mortgage rules change again… The maximum amortization for insured mortgages will be reduced to 30 years. The maximum amount you can borrow to re-finance your home will change to 85% loan to value. The changes only affect insured (CMHC) mortgages and not until March 18th 2011.

So, what does this mean? It actually is not a bad idea to keep more equity in your home as a safety net. You could find yourself in a negative equity situation refinancing up to 90% of the value of your home, especially if you plan to sell in the near future.  Having a shorten amortization (from 35 to 30 years) is only affecting a $200,000 mortgage by an increased payment of only $70 per month. As well, by chosing the lower 30 year amortization you owe about $5,000 less in 5 years. That’s huge savings over the life of a mortgage.

Although some in our industry will be disappointed with the rules, for now the government has left down payments at 5% minimum. Also given that we are in a country with the safest credit and banking industry, I welcome the new rules.

The details of the announcement can be found here.