New Mortgage Rules: March 18
I’ve received a lot of questions about the new mortgage rules that will be taking place on March 18th.
Basically, there are three main things:
1. Maximum high-ratio mortgage amortization is reduced from 35 years to 30 years.
Ok, Cool. What does this mean? A high-ratio mortgage is anything with less than 20% down payment. So if you have 20% down, you can still go for 35 years.
I tend to recommend that my clients go for a 25 year amortizations anyway. When you go higher than 25 years, the payments don’t go down very much but you end up paying a lot more in interest. As an example, when you go from 35 to 30 years, your monthly payment drops by $35 per 100k.
The main issue is that many times you need to put clients into 35 year amortizations in order to qualify them for a certain amount. So this new rule will actually negatively affect a lot of buyers who are just barely able to afford a place. Right now I am doing a deal that I wouldn’t be able to do if it weren’t 35 year amortization.
Not too long ago we were allowed 40 year amortizations and already we’re down to 30.
You will be able to qualify for a 35 year amortization as long as you have an approval by March 17th (not a pre-approval, you must have a solid purchase contract in place).
2. Maximum refinance amount reduced from 90% to 85%.
This is kind of annoying. Basically if you’ve worked to pay off your mortgage for a few years and you decide you want to refinance to buy another place, you will only be able to take up to 85% of your property’s value instead of 90%. Same thing, not too long ago it was 95%.
3. HELOCs (Home Equity Line of Credit) will no longer be insured by the government.
Will not have as big of an effect as the other two, but will make lines of credit more difficult to obtain.
As usual, let me know if you have any questions.
Vancouver Mortgage Broker