Mortgage Financing Changes
Lets get these changes straight so there's no unnecessary panic!
Mortgage financing changes 101:
The changes announced yesterday have sent some shockwaves though the market. Especially to potential new buyers who will see some of the changes impact them.
First thing first: These changes effect high ratio mortgages only.
High ratio mortgages occur when the mortgage amount exceeds 80% of the purchase price or appraised value of a home.
Currently the changes do not effect conventional mortgages. If you have 20% equity in your home ... Its business as usual.
The changes to mortgage financing take effect March 18 ,2011 with exception to the changes in home equity line of credit which will take effect April 18, 2011.
What the changes are:
QUESTIONS??? Give us a call ... we're always happy to hear from you!
The Potter Real Estate Team
RE/MAX Little Oak Realty
604-859-2341
Mortgage financing changes 101:
The changes announced yesterday have sent some shockwaves though the market. Especially to potential new buyers who will see some of the changes impact them.
First thing first: These changes effect high ratio mortgages only.
High ratio mortgages occur when the mortgage amount exceeds 80% of the purchase price or appraised value of a home.
Currently the changes do not effect conventional mortgages. If you have 20% equity in your home ... Its business as usual.
The changes to mortgage financing take effect March 18 ,2011 with exception to the changes in home equity line of credit which will take effect April 18, 2011.
What the changes are:
- Reduction in amortization from 35 years to 30 years: Contracts written after March 17th for a purchaser needing high ratio financing will be approved on a 30 year maximum amortization. Contracts written prior to and with a completion after the 17th of March will be allowed a 35 year amortization.
- Refinancing a home to a maximum of 85% of its current value (previously 90%): Clients wishing to take equity out of their home can finance it up to 85% of its value. Value will be determined by either the insurer’s (CMHC, Genworth) internal valuation system or if needed, an independent appraisal report over the home.
- Removal of high ratio lines of credit: This is by
far the most confusing and most misunderstood of all the revisions. The
sweeping changes of 2 years ago saw the halt of high ratio home equity lines of
credit being offered. The government agreed to allow clients with existing lines
to keep their facilities providing no new credit was extended. As of April 18,
2011 the government will not longer insure any portion of a line of credit which
exceeds 80% of a homes value. In other words ... If you currently have a line of
credit against you home secured by CMHC ... You will likely be asked to pay it
down to the allowable 80% limit or it will be changed to a blended payment.
QUESTIONS??? Give us a call ... we're always happy to hear from you!
The Potter Real Estate Team
RE/MAX Little Oak Realty
604-859-2341