Finance Minister Changes Mortgage Lending Guideline

January 27, 2011 § Leave a comment

Effective March 18th, 2011

John Panagakos discussed the Changing Mortgage Guidelines on CTV News Monday, January 17th 2011 with Dana Levenson. To view the interview, join John’s Facebook group by clicking here.

Main Points:

– 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%.

– Lower the maximum amount Canadians can borrow in refinancing their mortgages to 85% from 90% of the value of their homes.

– Home Equity Lines Of Credit will no longer be CMHC Insured

So what does all this mean for the mortgage consumer?

The average consumer probably won’t notice much impact from these changes. The goal wasn’t to discourage people from buying, but to make sure people that shouldn’t be borrowing aren’t over-extending themselves.

Why did the government make these changes?

The government is trying to encourage responsible borrowing and reduce the total interest payments Canadians pay on their mortgage. The changes are put in place to avoid a US-Style housing market crash, and to promote a stable housing market.

How will it effect the real estate market?

It is likely to spur a flurry of buyers who have been pre-approved based on the 35-year amortization. Expect some bidding wars!

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