New mortgage rules

New mortgage rules set by the Canadian government will come into effect on March 18, 2011. The new rules are as follows:

  • The maximum amortization period for a government-insured mortgage was lowered from 35 to 30 years.
  • The maximum borrowing limit on mortgage refinancing was reduced from 90% to 85%.  (i.e. during the refinancing, homeowners cannot borrow more than 85% of the value of their home.)
  • Government insurance backing on home equity lines of credit, or HELOCs, has been removed (beginning on April 18, 2011).

Changing the maximum amortization period from 35 to 30 years results in higher monthly mortgage payments, but a significant reduction in the total interest paid over the life of the mortgage. 

Please note that 35 years amortization may still be available for  borrowers who have made a down payment of more than 20% and do not require the government-insured financing. For specific details, check with a mortgage broker.

 Can you afford the change? Let's look at some numbers:

Mortgage Amount Payment Frequency Term Monthly payment with 30 years amortization Monthly payment with 35 years amortization Monthly Difference
$500,000 Monthly 4 Years Closed at 5.14% - Fixed Rate $2,710.39 $2,550.87 $159.52
$500,000 Monthly 5 Years Closed at 3% - Variable Rate $2,108.02 $1,924.25 $183.77
$100,000 Monthly 4 Years Closed at 5.14% - Fixed Rate
$542.08 $510.17 $31.91
$100,000 Monthly 5 Years Closed at 3% - Variable Rate
$421.60 $384.85 $36.75

You can use the following mortgage calculator on the TD Canada Trust website to calculate the monthly payment for your specific mortgage.

This article is not offered as financial advice, but is offered as a tool to assist our customers in understanding the effects of recent changes in Canadian Mortgage Rules. Before making any decision on financing your real estate deal, you should talk to a mortgage specialist regarding your specific circumstances.

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