<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=294326554740919&ev=PageView&noscript=1" /> New mortgage rules…simplified - Wilson Sisters

New mortgage rules…simplified

23 October 2012
Wilson Sisters

As you most likely have heard, in July of this year, the Government of Canada and the Superintendent of Financial Services implemented some new mortgage rules. There has been quite a bit of chatter and media discussion about the changes in the months since then. Up for debate is whether the new rules have affected the market or whether the changes in the market since July are unrelated (the market had to slow down at some point). Below is a simplified review of the changes as received from our mortgage broker, Robert Clancy of Safebridge Financial Solutions. The changes are not as dramatic as some may expect.

Mortgage Amortization (on high ratio mortgages/insured mortgages) reduced to 25 years. This means a borrower can no longer extend the amortization beyond 25 years. This change reduces borrowing power. On conventional mortgages (at least 20% down payment) 30 year amortization is still available.

Mortgage Refinance reduced to 80%. This means that a borrower refinancing a mortgage can only take out a maximum of 80% of their property value. Four years ago it was 95%. This change is a result of the Bank of Canada pulling back on equity withdrawals.

Fully Secured Lines of Credit only up to a maximum of 65%. If a client wants a fully secured line of credit against their property their maximum is 65% of the property value. If you combine your overall borrowing ie. a fixed rate mortgage or a variable mortgage along with a Secured Line of Credit the combined limit can be 80% of property value.

Self Employed Mortgages. Self employed borrowers who cannot confirm income on paper (called stated income mortgages) will find that the rules have tightened and lenders are being very careful with this type of borrower. Due to the difficulty in obtaining financing through A lenders, we can expect to see more and more self employed borrowers working with B lenders like Equitable Trust and Home Trust. Rates are roughly 1.5% higher with 15%-20% down payment which is not the end of the world.

Contrary to popular belief, there have been no down payment requirement changes. Borrowers qualifying on income may still borrow up to 95% of property value and self employed clients or stated income clients borrowing without verification of income can still borrow up to 90% of the property value on a purchase even though these types of transactions are becoming harder to qualify.

Hope this clears things up for everyone. If you have any questions, don’t hesitate to contact us.