Yesterday the Canadian Federal Government changed the rules on the maximum amortization period for repayment on Canadian mortgages and the amount considered on the value of a home for purposes of refinancing. For some this doesn’t really mean anything but for others in a tighter budget this could mean the chance of purchasing a suitable home in their financial range is no longer achievable.
In the past many home owners looking towards refinancing for reasons such as renovations, the maximum refinance amount a lender can approve is now only 80% of the market value of your home verses the 85% prior to Monday, a noticeable decrease. The most substantial change has effected the home equity line of credit with lenders now only offering 65% of your home equity for a line of credit where prior to yesterday it was 80%; this is a huge change. Repayment will also require borrowers to pay back their mortgages in less time, going from 30 years to 25 years amortization. Realistically this means either higher mortgages payments each month or purchasing homes in a lower budget range. A change in harsher applicant restrictions will only maximize this
The most surprising was the short notice announcement for the changes which came this past June 21st to be implemented July 9th when other federal government Canadian mortgage rule changes have had months notice to prepare or for borrowers to go ahead and purchase or secure those low mortgage rates, refinance or open a line of credit on the equity of their home before the changes were implemented. In a poll taken by BMO from June 29th to July 4th, less than half of those surveyed knew about the upcoming changes on July 9th. With a recent drop in sales from major centres, Toronto and Vancouver, and the upcoming possibly the resent harsh changes went a too far too quickly this time. A change to harsher applicant restrictions with lenders will only maximize this.
For a list of current rules and information, visit the CMHC website.