You have no doubt heard of the recent changes that the federal government has come out with regarding mortgage guidelines. They are specifically, maximum 25 year amortization on all mortgages with less than 20% down payment, tightening of debt service ratio’s, a cap of $1 million on insured high ratio mortgages and maximum refinances to 80% of the value of the property. For mortgages with more than 20% equity or down payment, the longer amortizations still apply.
These changes were regulated by OSFI (office of the superintendent of financial institutions) and affect all federally regulated financial institutions, typically Banks and Trust companies. It remains to be seen the effect this will have on credit unions who are not federally regulated.
There are more changes coming that were part of the regulations laid out by OSFI but they haven’t taken effect yet mainly due to allowing lenders time to update their systems. They will take effect Oct 31/12. These changes will be:
1. HELOC (home equity lines of credit) will only be allowed up to a maximum of 65% of the value of the property. This will affect new lines of credit only. Existing lines up to 80% will be allowed to continue.
2. Qualifying rates on conventional mortgages (more than 20% equity)will be the Bank of Canada benchmark rate for terms less than 5 years or for variable rate mortgages. (current benchmark rate is 5.24%. For fixed terms of 5 years or longer the contract rate is used to qualify.
3. Elimination of the 5% cash back for down payment.
4. Tightening up of income qualification guidelines for Business for Self clients. We will have to wait and see on this one what exactly this will look like.
If you are wondering how all this will affect any plans you may have, please call us to discuss your specific situation.
If you are considering a purchase that you wanted to do a cashback for down payment deal, now is the time to act as these will disappear after Oct 31/12. Some lenders could cancel this earlier though.
If you are looking for a secured line of credit up to 80% of value, let’s get it done now.
We are always here to help and can assist with any mortgage financing plans you may have.