The Bank of Canada has announced some changes to lending rules in Canada.
Mortgages can only be CMHC insured if they are 30 years or shorter amortizations. This means that most lenders will not approve mortgages over 30 years with less than 10% downpayment.
Refinancing of homes will be capped at 85% of the value, down from the current 90%
Interesting news indeed!
In my opinion, rather than increasing rates the "tightening" is a better tactic for the Bank of Canada to take. It will help protect us all from overextending ourselves.
Thanks for the update and hope you have a great year!
This is the article that was just sent to me from a mortgage broker, Paul
Meredith of CityCan Financial
With rising consumer indebtedness among Canadians, Finance Minister Jim Flaherty announced this morning that the government will be implementing new tighter restrictions on mortgage lending. As of March 18th, mortgages with amortizations greater than 30 years will no longer qualify for government-backed mortgage insurance (CMHC), down from the current 35 years.
In addition to the reducing the maximum amortization, they will also be restricting the amount of money one can obtain through refinancing to 85% of the homes value, down from the current 90%. This will also take effect on March 18th.
Mortgage applications with 35 year amortization and refinancing to 90% will still be accepted up until March 18th. Although, we will see if CMHC doesn't start declining these applications early, as we saw last spring when they reduced the maximum refinance to 90%, down from the previous 95%.
Home buyers will still be able to purchase homes with as little as 5% down payment. There are still ways to purchase with no money down, such as using a 5% cash back and applying it to the down payment. There is no word as to whether CMHC will continue to offer that product after March 18th.
Tomorrow morning, the Bank of Canada makes their next interest rate announcement. The prime rate is expected to remain unchanged at 3.00%.
Written by Paul Meredith, CityCan Financial
I hope this finds you Happy and Healthy!
All the Best!
A. Mark Argentino
P. Eng. Broker
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RE/MAX Realty Specialists Inc.
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