New mortgage rules in Canada. What is changing?

As you probably heard, new rules to government-backed insured mortgages came into effect as of last Friday. Here is an overview of what is changing:

• Reduce the maximum amortization period  from 35 years to 30 for new government-backed insured mortgages with loan-to-value ratios of more than 80 per cent. 
• Lower the maximum amount Canadians can borrow in refinancing their mortgages to 85 per cent from 90 per cent of the value of their homes. 
• Withdraw government insurance backing on lines of credit secured by homes, such as home equity lines of credit, or HELOCs. 

What this means is as of March 18, 2011 Canadians who purchase their homes with less than 20% down payment will have to pay around $30-35 more per month for each $100 000 of mortgage loan. The following table illustrates the difference in monthly payments for amortization period of 35 years vs. 30 years for a mortgage loan of $300,000.

Interest Rate	35-Year Amortization-Monthly Payment	30-Year Amortization-Monthly Payment	Difference in Monthly Payment- 30-Year vs. 35-Year Amortization
4 per cent	$1,322	$1,427	$105
5 per cent	$1,504	$1,601	$97
6 per cent	$1,696	$1,784	$88

As of April 18th, 2011 it will be harder to get secured line of credit and take advantage of lower interest rates if you keep less than 20% in equity. This particular change affects non-amortizing loans, which means that borrowers are not required to make regular payments on the principal amount of the loan

No more re-financing for more than 85% (used to be 90%)

Keep in mind that all these rules apply only to government-backed insured mortgages. Private lander can still follow own rules in lending