Blogs & Comment

What new mortgage rules mean

To curb record levels of debt in Canada, federal finance minister Jim Flaherty announced today a tightening of borrowing requirements for CMHC-insured mortgages (down payments less than 20%). Here is a summary of the changes, a round-up of reactions and a tally of past changes.
Changes announced
maximum amortization period reduced to 30 years from 35 years (on March 18)
maximum equityable to borrow from houselowered from 90% to 85%(on March 18)
no more CMHC backing ofhome equity lines of credit (on April 18)
Reaction tonew measures:
you can still get 35-year amortization periods if downpayment > 20%
shorter amortization period will increase monthly payments between $88 and $105
dropping CMHC backing of HELOC will have a minimal effectnear term
CMHC shouldnt be guaranteeingmortgages at all, never mind just HELOCs
measures take some pressure off Bank of Canadato raise rates
Home CapitalCEO thinkstighter mortgage rules wont disrupthousing market
tighter rules will take out first time buyers and bite the housing market
60-day waitfor changes could spark a mini boom,followed by let down
new rules will not affect people who need to renewtheir mortgages
Not everyone buying plasma TVs with HELOCs CAAMP outlines a different solution
Previous changes(2008 to 2010):
down payments for CMHC-insured mortgages increased from 0% to 5%
variable mortgages at lower rates require borrower to qualify at 5-year fixed-rate
new loan documentation standards + consistent minimum credit score requirement
minimum down payment of 20% on properties purchased solely for investment purposes.