Federal Government Changes Mortgage Financing Rules

January 17, 2011 — The federal government has announced changes to mortgage financing rules for government-backed (insured) mortgages (less than 20 per cent down payment), which will affect maximum amortization periods, mortgage refinancing, and home equity lines of credit.

Details

The changes announced by the federal government include:

Reducing maximum amortization period to 30 years, from 35 years.
Lower the maximum amount Canadians can borrow in refinancing their mortgages to 85 percent, from 90 percent, of the value of their homes.
Withdraw government insurance backing on lines of credit secured by homes, such as home equity lines of credit. This change would apply to Home Equity Lines of Credit that do not amortize over time (i.e. borrowers are not required to make regular payments on the principal amount of the loan). However, with established scheduled principal and interest payments, a loan will continue to be eligible for government-backed insurance, provided it meets the underwriting standards set by the mortgage insurer.
The changes to amortization periods and refinancing rules will come into force on March 18, 2011. The withdrawal of government insurance backing on home equity lines of credit will come into force on April 18, 2011. Exceptions would be allowed after the new measures come into force where they are needed to satisfy a binding purchase and sale, financing or refinancing agreement entered into before the corresponding coming into force dates.

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