Finance Minister Jim Flaherty has announced changes to Canada Mortgage and Housing Corporation (CMHC), Cananda's national housing agency. CMHC is Canada's premier provider of mortgage loan insurance, mortgage- backed securities, housing policy and programs and housing research.
The three major changes, effective July 9th, 2012, are as follows:
- A reduction in maximum amortization for CMHC insured mortgages from 30 years down to 25 years. This will result in buyers paying less in interest over the amortization period; however, the downfall is that fewer people will qualify for a mortgage as payments will be higher and more income will be required to qualify. (GDS and TDS ratios are now 39 and 44 respectively.) At this time there are no changes to conventional mortgages which can still be amortized over 30 years.
- Homes priced over $1 million will no longer be eligible for CMHC insurance.
- The maximum loan to value ratio for refinancing will drop to 80% from 85%. People wishing to take out equity greater than 80% will require secondary financing.