Recently, the Canadian government has made several changes to the way that mortgages are underwritten, and if you are thinking of buying a house or refinancing, then these changes will impact you.
90% Refinances are being Reduced
A few years ago, you could refinance up to a maximum of 95% of the property value of your home. Last year, the Bank of Canada reduced this number to 90%, and the government is about to reduce this number again. This time the amount is being reduced another 5% to 85% of the property value.
What does 85% Refinances mean to you?
This means that when you are purchasing a new home, it could take well over the first term before you could be eligible to refinance. Also, if you need to refinance, then it may not be available to you anymore. If you are looking to do any refinancing on your mortgage, then now is the time to start your refinancing.
35 Year Amortizations; What is changing?
A few years back, a new home buyer could purchase a home with a 40 year amortization and zero down payment. They have since removed many of these features. Now, you need a minimum of 5% for the down payment, and the maximum mortgage amortization that you can get is 35 years.
The government is set to make another change on mortgage regulations. This time, hey are changing the maximum amortization to 30 years if you are putting less than 20% down payment. This means that the maximum mortgage size that a new home buyer can get is much lower.
These new government changes are set to take effect on March 18, 2011. This means that if you are looking at making a purchase or refinancing, then now is the time to get this done. For many, this does not apply, but for many it still does.
What do you think of the new mortgage regulations? Will these rules change the mortgage market? Leave your responses in the comments below.
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