Today, the Government announced three changes to the standards governing government-backed insured mortgages.

aka – High Ratio Mortgages (Less than 20% down)

1) MAXIMUM AMORTIZATION PERIOD TO 30 YEARS

The Amortization is the time it takes to pay off your entire mortgage. Not to be confused with the term of your mortgage.
Typical mortgages in Canada have terms of five years or less during which a specific fixed or variable interest rate will apply, and the mortgage can be renewed at the end of the term.

Today’s news will reduce the maximum amortization period from 35 years to 30 years.

A lower amortization period results in an increase in the monthly payment, hence making it harder to qualify.

2) Maximum Loan to Value for refinances will be reduced from 90% to 85%

Borrowers can now refinance their mortgage and increase the amount of the loan secured against their home, but today’s changes will reduce the limit on refinancing from 90 per cent to 85 per cent of the value of the home. Refinancing lowers the borrower’s equity in their home. Reducing the maximum loan-to-value ratio on refinancing will encourage Canadians to keep at least 15% equity in their home.

3) The government will no longer offer insurance for Lines of credit

Because a line of credit doesn’t have a principle reduction built into the payment, you could go on forever simply making interest only payments never reducing your balance. In view of this, the government figures it’s too risky to insure.

PS – Here’s a question for Mr. Flaherty…Why do you think the majority of refinances take place anyway? To pay off Consumer debt. Address consumer debt and maybe then you’ll be dealing with the REAL ISSUE.

What do you think of these changes?

Please comment below…

Mark Fidgett
Vancouver Mortgage Broker
Owner www.NotaPennyDown.com
604-273-2002