More Changes To Insured Mortgage Rules

“Insured Mortgage Rules Will Change This Spring For The Second Straight Year”

In order to continue to reduce the risk for a real estate bubble in Canada and a sub prime mortgage market collapse, Finance Minister Jim Flahtery and Natural Resources Minister Christian Paradis announced today that the federal government will be taking further measures to adjust the government backed insured mortgage program.

More specially, there were three changes announced to the insured mortgage program that will take affect during the months of March and April of 2011.

The first change focused on mortgage amortization whereby the current maximum mortgage amortization period for any new government backed insured mortgage will be reduced from the current maximum time period of 35 years down to 30 years.  This will increase monthly mortgage payments for some in the short term, but significantly reducing the amount of interest they will be paying over the entire life of the mortgage, assuming the mortgage is paid to the end of the amortization period as schedule.

The second change announced was a lowering of the maximum amount that be refinanced under an insured mortgage from 90% to 85%.  This will impact the amount of money individuals can draw out of the equity in their homes for such things as debt consolidation, estate planning, and so on.

The third and final change forth coming is an elimination of government insurance protection on lines of credit secured by homes.   The reasoning provided was to reduce the risks associated with rising consumer debt that are more likely to increase under an insured line of credit  where the use of borrowed funds are typically unrelated to the purchase of a home and should not be borne by the taxpayer through a government insurance coverage.

The first two changes related to amortization period reduction and the maximum refinancing amount reduction will go into affect on March 18, 2011.

Government insurance on secured lines of credit will be eliminated as of April 18, 2011.

These changes come on the heels of  the changes that took affect on April 19, 2010 where  1) debt servicing assessments were adjusted for mortgage requests above 80% of the value of the property and mortgage terms less than 5 years; 2) mortgage refinancing amounts were dropped from 95% of property value to 90%, and 3)  rental properties have a minimum 20% down payment at time of purchase to qualify for mortgage insurance.

If you’d like to get more information on the changes and discuss how they may impact you, please give me a call at you’re earliest convenience and we can go over your situation and mortgage financing needs in more detail.

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About the Author Joe Walsh

I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel