There has being a tremendous amount of chatter and media news over recent mortgage rules changes implemented by Government of Canada and Superintended of Financial Services. Yes these new rules seemed to have possibly effected the market or maybe it is just bad timing (the market had to slow down at some point). Below is a simplified review of the changes. As you will see it is not the end of the world and some mortgage products never changed at all.
Mortgage amortization (on high ratio mortgages/insured mortgages) reduced to 25 years. This means a borrower can no longer extend the amortization past 25 years. This change will reduce a borrowers borrowing power. On conventional mortgages ( at least 20% down payment) 30 year amortization is still in play.
Mortgage refinance reduced to 80%. This means that a borrower refinancing a mortgage can only take out a maximum of 80% of their property value. Four years ago it was 95%. You can see that the Bank of Canada is trying to pull back on equity take outs.
Fully secured Lines of credit only up to a maximum of 65%. If a client wants a fully secured line of credit against their property their maximum is 65% of property value. If you combine your over all borrowing i.e. a fixed rate mortgage or a variable mortgage along with a Secured line e of Credit the combined limit can be 80% of property value.
A word on Self Employed mortgages. For Self Employed borrowers who cannot confirm income on paper (called stated income mortgages) the rules have tightened and lenders are being really careful with this type of borrower. So expect to see more and more self employed borrowers get financing through B lending side such as Equitable Trust and Home Trust. Rates are roughly 1.5% higher with 15% to 20% down payment so not the end of the world.
There has being no down payment changes to purchases as some people are led to believe. Borrowers qualifying on income can still borrow up to 95% of property value and Self Employed clients or Stated Income clients borrowing without verification of income can still borrow up to 90% of property value on a purchase although this is getting harder to qualify.
Please do not hesitate to call or email me with any questions.