30 Year Amortization Gone As Canadian Mortgage Lending Rule Changes

July 4, 2012

By now you’ve probably heard that the Government is making changes to the mortgage rules. Among other changes, the maximum time you can amortize your mortgage changed from 30 years to 25 years. The new rules kick in on July 9th.

Yup, next week!  So why the changes? Things were getting hot and Ottawa wanted to cool it off. It’s like keeping a chocolate bar in your pocket. Keep a good thing in there for too long and it melts. And nobody wants a mess.
But seriously, the concern was that the Canadian real estate market was moving too fast especially in cities like Toronto and Vancouver and people are taking on too much debt.
So how do these changes affect you?
3 Mortgage Changes You Need To Know About
1. The maximum amortization allowed to qualify for a high ratio mortgage is decreasing from 30 years to 25 years.  That means that if you are buying a home with less than a 20% down payment your mortgage will be qualified based on a 25 year amortization. Translation: borrowers will now qualify for roughly 10% less mortgage money.
2. Maximum refinance capacity for existing homeowners is also being affected. Previously it was possible to refinance your home up to 85% of the market value. The new amount is being reduced to 80%.
3. For those reaching up to homes over $1 million there have also been rule changes. It is no longer possible to insure mortgages over $1 million. So if you are buying a $2 million dollar home with $500,000 down payment you would only qualify for a mortgage up to $1 million.
Bottom line: mortgage credit is being held back. Some see this as a good thing. Others aren’t too happy. There’s the one side that argues the market is already cooling and these measures may slow things down too much. On the flip side, many Canadians are taking on too much debt. These changes can soften the landing if things go south.
There’s Still Time. But You Have To Act Now
There is still a window of opportunity to submit your mortgage application before the rule changes kick in.
I especially urge you to call me if you are concerned about your debt load and wish to refinance in order to consolidate debt. Rates are still at all time lows. After this week the opportunity under the old rules will pass. Act now. You can contact me directly to get strated. Or if you have any other questions about mortgages, financing, budgeting, llamas….just ask. For you…anything.


Christopher Molder

Mortgage Broker

Christopher is a mortgage broker based in Toronto, Canada. And a son of a broker too. He’s a second generation mortgage broker. Following in his father’s steps he joined the family mortgage business straight out of university.