1. 25 Year Amortization. If you are purchasing a home with less than 20% down, the maximum amortization for these insured mortgages is now 25 years (from 30). However, if you have more than 20% equity in your home, 30-35 year amortizations are still available with various institutions. The shorter amortization means your payment will now be slightly higher and you will qualify for a lesser total mortgage amount. On a positive note, you will save money on interest payments over time as the higher payments translate into a reduction in the principal.
2. 80% LTV Refinance. If you are planning to refinance or take out equity from your home, the maximum loan-to-value (LTV) is now at 80% (from 85%). The benefit of this rule change is that you will not have to pay an insurance premium when refinancing your home, while also retaining more equity in your most important asset. If you currently have an insured (high-ratio CMHC type) mortgage it is still possible to refinance over 80% LTV and keep the existing amortization (e.g. 35 years remaining). As long as you do not need to increase the existing mortgage amount, we can port this insurance to another lender when setting up a transfer or refinance. Keep in mind that if you own a home you can draw out up to 80% of the value of the home as cash to use at your discretion. Most Canadians have more than 20% equity in their homes, so the impact on this new rule should be minimal.
I believe that the government has made a wise decision based on these rule changes . Many Canadians have borrowed more than they can afford to pay back. When interest rates eventually rise these homeowner will feel the pressure of increased payments and might not be able to manage them. As the Bank of Canada overnight rate and bond yields are extremely low now, mortgage rates are very attractive. Most consumers are now opting to lock into the 4, 5, and 10 year term fixed mortgage rates to ensure they are not vulnerable to rate changes.
How will this affect the Vancouver real estate market? According to recent reports, the BC housing market is now turning more favourably to buyers. There are currently fewer unit sales, which will ultimately give prospective buyers more leverage in terms of property needs and pricing. If you are thinking of purchasing a property this fall, we can do a quick 30 minute pre-approval as well as introduce you to a Realtor to assist you in your property search. Keep in mind there is no cost to use a Realtor as a buyers-agent and our mortgage broker services are free.
If you have any more questions please do not hesitate to send me an email at [email protected]