New Mortgage Lending Rules
Take Effect March 18th, 2011

The new changes to rules regarding the mortgage industry sound big but have a very small impact on the average Canadian. Here is the short version with a longer explanation below.

• Amortization period capped at 30 years for High Ratio Mortgages ( only those over 80% loan to value or with less than 20% down)

• Reduction of government backing for home equity lines of credit (will make it slightly harder to qualify for lines of credit as fewer banks will offer them)

• Maximum refinancing reduced to 85% from 90% LTV (makes people keep more equity in their home)

These rules are for insured mortgages only this does not affect any of the alternative lending sources.

•Reduce the maximum amortization period to 30 years from 35 years for new government-backed insured mortgages with loan-to-value ratios of more than 80 per cent. This will significantly reduce the total interest payments Canadian families make on their mortgages, allow Canadian families to build up equity in their homes more quickly, and help Canadians pay off their mortgages before they retire.

•Lower the maximum amount Canadians can borrow in refinancing their mortgages to 85 per cent from 90 per cent of the value of their homes. This will promote saving through home ownership and limit the repackaging of consumer debt into mortgages guaranteed by taxpayers.

•Withdraw government insurance backing on lines of credit secured by homes, such as home equity lines of credit, or HELOCs. This will ensure that risks associated with consumer debt products used to borrow funds unrelated to house purchases are managed by the financial institutions and not borne by taxpayers. 

Source: Colin Ward, AMP