The Bank of Canada has taken a step towards tightening up Mortgage Lending. This new direction will be taken on quickly (July 9 2012)!
What this is going to do is make Buyers more accountable for their investment by way of larger down payments & monthly payments The three changes are noted below from my R.B.C Mortgage Specialist Guy DePicciotto:
(1) Maximum amortization is dropping from 30 years to 25 years. This is equivalent to a 0.90% rate increase on affordability.
(2) Maximum refinance amount on a CMHC mortgage is dropping from 85% to 80% of the property value. Note: at 80% loan to value, CMHC insurance is rarely required, so essentially CMHC is getting out of the refinance market
(3) No insurance will be available for homes with a value over $1,000,000. Therefore a client will have to have 20% as a down payment.
Please see the CBC News report on these changes attached at the link below:
http://www.cbc.ca/news/business/story/2012/06/21/flaherty-mortgage-cmhc.html
Below please find a quick Q & A below that outlines the changes to a couple of specific situations again provided by my R.B.C Mortgage Specialist Guy DePicciotto:
Q. What is required to qualify for an exception to the new parameters?
A. The new measures will apply as of July 9, 2012. Exceptions will be made to satisfy a binding purchase and sale, financing or refinancing agreement where a mortgage insurance application has been made before July 9, 2012. While the changes come into force on July 9, 2012, any mortgage insurance applications received after June 21, 2012 and before July 9, 2012 that do not conform to the measures announced today must be funded by December 31, 2012.
Q. Will a purchase and sale agreement dated prior to July 9, 2012 be considered binding if there are outstanding conditions that have not been fulfilled prior to July 9, 2012?
A. Yes, if the date on the purchase and sale agreement is earlier than July 9, 2012, and a mortgage insurance application has been made prior to that date, the new parameters will not apply, even if the conditions of the agreement have not been waived.
I have a written mortgage pre-approval from a lender, dated before July 9, 2012 with a 30-year amortization. Will I still be eligible for a 30-year amortization if I don’t sign an agreement of purchase and sale until July 9, 2012 or later?
A. No, a mortgage pre-approval without an agreement of purchase and sale is not sufficient to qualify for a 30-year amortization. You may have a 30-year amortization only if your agreement of purchase and sale is dated before July 9, 2012 and you have made a mortgage insurance application before July 9, 2012. You may wish to discuss with your lender to revise your mortgage pre-approval using the new parameters announced today.
Please see a further detailed list of Q & A from the Department of Finance Canada attached to the link below:
http://www.fin.gc.ca/n12/data/12-070_2-eng.asp
For any further information on this topic please contact myself at jay@jaymcinnes.com / 604 771 4606 or Guy Depiciotto (RBC Mortgage Specialist) at guy.depicciotto@rbc.com / 604 726 0940
