Joe Saray
Courtier hypothécaire

The surprise announcement from the Department of Finance that mortgage rules will change again on July 9 saw many homebuyers scrambling to get in under the wire with the old rules. These latest new rules - amortization limit of 25 years and refinance limits of 80% - are designed to lower debt levels, enforce some belt-tightening, and promote savings through home ownership. Here's how the new rules will affect Canadians after July 9:

• Based on today's rates, borrowers can expect that monthly payments will be approximately $52 more per $100,000 in mortgage, with about 10% less purchasing power. Many will need to consider a smaller home or simply wait longer. However, it does mean that homes will be paid off faster and less total interest will be paid.
• Anyone who needs to refinance to consolidate high interest debt to lower interest costs and boost monthly cash flow, will not be permitted to refinance a mortgage above an 80 per cent LTV.
• For existing homeowners, the new parameters will only apply if they need to increase the amount of their insured mortgages.
• 20% down payment is now required on purchases of $1 million or more, a measure that clearly won't affect the majority of homebuyers.

These changes will only affect borrowers with less than 20% down/equity in their home.

The Office of the Superintendent of Financial Institutions (OSFI) also released their own new underwriting guidelines for regulated lenders, which will come into play later this fall, and include:

• Home equity lines of credit (HELOCs) will have a maximum of 65 per cent loan to value, down from 80 per cent.
• Conventional mortgages will be qualified using the benchmark rate if the term is less than five year, which is currently required for insured mortgages.
• Self-employed borrowers will need to provide reasonable income verification.
• Cash back mortgages will be eliminated.  Borrowers will need to fund their downpayments from their own resources, although gifted downpayments will still be possible. 

If you are in the market for a mortgage right now, either purchase, renewal or refinance, you'll be pleased to know that the great Canadian mortgage sale is continuing right into summer 2012, with historically low 5- and 10-year fixed rates.  Contact your Mortgage Consultant for a review of your situation.