The new mortgage rule changes: How they affect you
The new mortgage rules were announced on January 17th, 2011 by the Finance Minister Jim Flaherty. These changes are put into place in an attempt to reduce Canadian household debts. Is this a big deal?
These changes can affect home buyers, home owners, and those who are looking to obtain secured line of credits.
1. How do the new mortgage rule changes affect home buyers?
- As of March 18th, 2011, anyone looking to buy a home as their primary residence with less than 20% downpayment, can only apply for a mortgage with a maximum of 30 years amortization as opposed to the 35 year maximum prior to the announcement.
- The affect this mortgage rule change has for a home buyer is miniscule. For example, a $200,000 mortgage monthly payment difference between 30 and 35 year amortization is an estimated additional $76.00/month. Which translates to an additional $988.00 total in payments per year.
- However, the amortization change combined with the mortgage rule changes announced in April 2010, (qualifying for a mortgage at a higher, posted 5 year fixed rate) will reduce the mortgage amount that individuals can qualify for.
- Home buyers can still put as low as 5% for their down payment on a primary residence purchase
2. How will the mortgage rules affect home owners?
- For home owners who are looking to refinance their mortgage, these new changes now limit home owners to only borrow to a maximum of 85% of their home value.
- This was reduced from the previous maximum of 90%.
3. Will this affect home owners who are looking to obtain secured lines of credits?
- Secured line of credits will not only be obtained through non-insured mortgages. This means that you can refinance your property up to 80% of its value.
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