The Federal Government announced
more rule changes designed to support the long-term stability of Canada's
housing market and continue to encourage home ownership. The changes taking effect March 18th, 2011 are:
1. Maximum mortgage amortization
will be reduced from 35 to 30 years for insured mortgages (mortgages are
insured when there is less than 20% equity in the property’s value).
2. Maximum refinance amount will be
reduced from 90% to 85% of the property’s value.
3. Home equity lines of credit,
also known as HELOCs, will no longer be eligible for Government-backed insurance forcing
lenders to keep them on their books versus sell them off in the market.
So what does this mean to the
consumer? Time will tell but experts predict only 2% of mortgages transactions
will be affected. A reduction in mortgage amortization by five years will
increase the average payment by just over $100 per month but reduce total
interest costs by over $40,000 during the life of the mortgage. So, while
affordability is modestly affected, the long-term interest cost savings for
homeowners can be substantial.
While lowering the maximum
refinance to 85% restricts homeowner’s ability to use some of their equity for
other purposes, the reality is most refinance transactions are below 90%
anyway. You still have time to maximize your refinance options if you act quickly.
Lastly, the impact of lenders not
being able to securitize HELOCs is unknown at present but with strong competition
and consumer demand, we expect to see a continued supply of these products at
competitive rates.
At Jencor, we are proud to offer
the expertise that comes from 23 years of experience arranging over $8 Billion
in home financing.
Call us well ahead of March 18 to avoid losing some of your options.