The Federal Government has made a big splash recently by announcing changes to the rules for goverment-backed insured mortgages and lines of credit secured by homes. These changes are going to have a big effect on buyers, sellers, and home owners alike. The new measures that are being put in place are:
- Reduce the maximum amortization period from 35 years to 30 years for new government-backed insured mortgages with down payments less than 20 per cent.
- Lower the maximum amount Canadians can borrow in refinancing their mortgages from 90 per cent to 85 per cent of the value of their homes.
- Withdraw government insurance backing on lines of credit secured by homes, such as home equity lines of credit, or HELOCs.
The changes to the mortgage insurance framework will take effect on March 18, 2011. The removal of government insurance backing on lines of credit secured by homes will take effect on April 18, 2011.
To see the Department of Finance's announcement click this link : http://www.fin.gc.ca/n11/11-003-eng.asp
As a Buyer, what this means to you is that when you get approved for a mortgage it will be for LESS money. Which has a direct affect on what and where you can afford to buy. As a Seller, what this means to you is that there may be downward pressure on price. Asking too much could eliminate a large segments of buyers from considering your home. As a Home Owner, what this means to you is that borrowing against your home will become a higher risk for lenders. Lenders may react by tightening their in-house credit requirements.