Mortgage changes for 2011

By now you will have heard that there are changes to mortgaging in Canada for 2011. Here are some comments on the subject by our contributor, Taya Weiszhaar at moc.prgegagtrom|ayat#moc.prgegagtrom|ayat:

"You may have heard about the changes to mortgage rules that were announced yesterday, not as bad on the qualifying side as some news articles were proposing this past week.

Changes for the amortization and 85% refinance are effective Mar 18th, 2011. The Heloc change is effective April 18th, 2011.

Federal Finance Minister Jim Flaherty announced the following changes to mortgage insurance rules intended to ensure the stability of Canada's housing market.

These measures include:

* Amortization period capped at 30 years
* Maximum refinancing reduced to 85% from 90% Loan-To-Value
* Reduction of government backing for home equity lines of credit

My thoughts;

The primary change effecting qualifying is the reduction in amortization to 30 years, which is going to have an effect - however, in many cases, I see and as do others, that many borrowers that choose a 35 year amortization can quite often qualify for 30 years - they just choose the longer amortization for extra cash flow.

But nonetheless, it will reduce the purchasing power for some and time will tell the effect it will have on current home values.

For those that feel they need the 35 years, now is the time to make that purchase or refinance happen.

The second change effects refinancing, reducing the amount that you can borrow from the current 90% of the value of your home to a 85%.

This, I feel, is a big hit for some homeowners, since many just want to take advantage of today's lower interest rates and refinance early - with some homeowners having lower house values and payout penalties - even more folks that want to seize this opportunity will not be able to, they simply won't have enough value at 85% to cover everything, this I believe is unfortunate!

Especially, since the math says they can recoup their penalties and still save more money with the lower rates.

I believe the banks lobbied for such a change to help ensure their client retention, shame!

Additionally, many borrowers who have manageable debt, but also see an opportunity to save money with today's low rates are being penalized as well.

Does the government have a point about borrowers using their equity to make high-end frivolous purchases and they want to curb this spending, absolutely, but too many are grouped under this scenario that don't apply.

If you know someone who has been pondering a refinance and think they may need the 90% value of their home, now is the time to get serious, please spread the word.

The last change is lenders will no longer receive government backed insurance (and therefore securitize) Lines of Credit. This will likely have a bigger effect on the non-bank lenders' and time will tell of what their actions will be in this regard.

Thankfully, I am glad that the proposed 100% condo fee for qualifying or increased down payment didn't become a reality!"