New Mortgage Rules

As you are aware the Government of Canada has recently announced (January 17th, 2011) a number of product and policy changes with regards to the Mortgage Insurance Guarantee Parameters in an effort to encourage Canadian families to reduce debt and increase savings.  Home Mortgage Advice team has reviewed closely these new rules to assess the impact to Canadian home owners.    

Please find a summary of changes below:

Effective March 14, 2011 

Maximum Amortization Period

High Ratio Mortgages

·         For high ratio deals, (loan to values greater than 80%) the maximum amortization has been reduced to 30 years from 35 years.

Conventional Mortgages

·         For conventional deals, (loan to values less than 80%) the maximum amortization will remain at 35 years. Home Mortgage Advice has access to 40 years amortization as well.

Refinance Maximum Loan to Value

·         The maximum loan to value for 1-4 unit residential properties will be reduced to 85% from 90%. 

How does this impact existing Mortgage holders that are looking to transfer their mortgage and receive a better mortgage rate? 

·         For high ratio deals with amortizations greater than 30 years borrowers will maintain their existing amortization on a simple refinance or under our switch program (no additional funds).

·         The loan to value maximum will remain at 95% for port transactions.  Product and program specific guidelines apply for each lender.

How does this impact existing mortgage holders that are looking to refinance or port and increase?

·         In some instances, but not all, for high ratio transactions borrowers with amortizations greater than 30 years will be permitted to blend their amortization.  The maximum loan to value for refinance transactions will be 85% and the maximum loan to value for a port and increase will remain at 95%.  Product and program specific policies apply.

 Take a look at this example:

·         Blended Amortization example:

o   Original high ratio loan: $200,000 with 38-yrs amortization remaining (original 40yrs - 2yrs elapsed = 38 remaining)

o   Additional Money: $100,000 with a 30-yr amortization (new maximum amortization for high ratio mortgages available)

o   Formula: (200,000 x 38 + 100,000 x 30) / (200,000 + 100,000)

o   Blended Amortization = 35 yrs

This is a summary of a new Mortgage Rules that are taking effect on March 18th, 2011. For any other questions don’t hesitate to contact us.