New Mortgage Rules

The Canadian government has unveiled new guidelines that will soon apply to government backed insured mortgages with down payments of less than 20%.

Beginning March 18, the maximum amortization period will be reduced from 35 years to 30 years. As a result, some new borrowers will face higher monthly payments or could possibly qualify for less than they once expected.  The government is also lowering the maximum amount people can borrow through a mortgage refinance from 90 to 85 per cent of the home’s value.  Government officials have said these regulations are necessary to uphold the long-term stability of Canada’s housing market, curb the country’s growing debt levels and increase the likelihood that borrowers will be able to afford their mortgage payments if interest rates rise in the future.

The amortization change has the same effect on payments as an interest-rate hike of slightly more than half of a percentage point, and is likely to have a more significant impact in local markets with higher prices, such as Vancouver or Toronto.

What the Changes Mean to You:

Buyers: First-time buyers are likely to be affected the most, and some could potentially be priced out of their favourite neighbourhoods. The good news is they will still only need a minimum 5% down payment to qualify for
a government-backed mortgage.

Sellers: Some people may want to purchase a home before the regulations come into play, so the buying season could start sooner than usual. Owners who are planning to put a home on the market this spring
may want to adjust their time frames—especially if they hope to appeal to first-time buyers.

Refinances: The new measures could reduce the amount of equity that refinancing homeowners can cash out and use for home improvements, debt consolidation, education or investments.

Renewals: The restrictions only apply to new loans, so borrowers with existing 35-year amortization schedules will most likely be able to extend them when their mortgage comes up for renewal.

2 Ways Buyers Could Pay:

Max Affordable House Price Drops
Scenario: A couple who earns $120,000 annually and has 10% to put down qualifies for…
Max house price with 35-year amortization: $620,000
Max house price with 30-year amortization: $560,000

Monthly Payments Jump
Scenario: A $300,000 mortgage with a rate of 4%
Monthly principal and interest payments spread over 35 years: $1,322
Monthly principal and interest payments spread over 30 years: $1,427
Additional monthly cost: $105
On the plus side, the total amount of interest paid
over the life of the loan is less, and homeowners would save: $41,850

For more information please call:
Andrew Roach - Mortgage Agent, AMP
Dominion Lending Centres
143 Ontario Street North
Milton, Ontario
Lisa Roach

Lisa Roach

CENTURY 21 Future Realty Inc., Brokerage*
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