Canadian Mortgages –Jim Flaherty’s Way
New Rules on Canadian Mortgages- How does it affects you?
Monday July 09, 2012 our finance minister implemented new rules on Canadian mortgages for home buyers. Is it a good thing or bad, depends upon what hat you have on. This blog post briefly explains the affect on potential first time home buyers.
Following are the list of changes implemented on July 09 2012 for Canadian Mortgages:
- Amortization of Insured mortgages lowered to 25 years
- Refinancing of existing homes capped at 80% Loan to Value
- Maximum purchase price for insured mortgages limit at $1 Million dollar homes
What group of Canadian Mortgages do these changes really impact?
Only Insured Canadian mortgages!
Insured Canadian mortgages are the mortgages when a home buyer has less than 20% down payment and lender is required to insure this loan in case the home buyer defaults.
The home buyer pays for this insurance while lender lends you money to buy your home. The 2 major players in Canada insuring low down payment mortgages are CMHC & Genworth. To learn more on premiums of this insurance you are encouraged to visit MortgageDeliveryGuy.ca.
In other words if you as a home buyer has 20% down payment, this new change of 25 year amortization does not affect you. As long as you qualify under mortgage triad, you may still get 30 years of amortization.
How much impact does 5 years of amortization have on your monthly payment?
Your monthly mortgage payment is increased by additional 0.9%.
In a nut shell, this new change in amortization makes home ownership more expensive for first time home buyers specifically those who has less than 20% down payment. These changes are nothing new to Canadian real estate market. This is how it was in 2002.
If you are renting and wish to buy your home, I urge you to learn more about your Mortgage triad (CID) profile. Amortization is one part of the mortgage puzzle. There are equally important other factors which impact the outcome of your mortgage application
You are invited for schedule a Free, No Obligation, Mortgage Strategy Session with Mortgage Delivery Guy. What day works for you better Weekdays or Weekends?