More on the New Mortgage Changes – How they may affect you
The Government announced on January 17th that they will be making changes to their government backed mortgages. Namely, any mortgage that has less than 20% as a downpayment (with a few exceptions). The changes are very important and may affect you. They are as follows:
Decrease amortization from 35 years to 30 years effective March 18th 2011
For most of my clients this does not mean you are paying off your mortgage for 35 years but it does help lower the payments especially for the first time buyer. It also gave the consumer more purchasing power – more home for a more affordable payment. Do you pay more interest? Absolutely but it can make sense in many cases. What does this change mean to you? Essentially for all mortgages, whether they are purchases, refinances or renewals – the maximum amortization will be 30 years effective March 18th. If you have purchased a home and have a lender approval on or before March 17th then the 35 year amortization will still apply, even if you are closing after the 18th. Pre-approvals don’t apply. What does this mean for your purchasing power? It decreases the amount you may qualify for by 6-7% and based on a $300,000 mortgage for example, your payments would increase by $100 per month. If you are looking at buying and want to have the flexibility with the 35 year amortization, call me as soon as possible to discuss securing this option. If you are looking to refinance and need this option for cash flow management, time is of the essence, please contact me to get the process started.
Reducing refinance amounts from 90% of the value of your home to 85%
As of March 18th, 2011 you will no longer be able to refinance your home up to 90% of its value, it will be decreased to 85%. This is important if you have unsecured debt and want to pay off and replace the high credit card, lines of credit interest you are paying with a considerably lower interest rate in a mortgage. If you require a 90% refinance for; renovations, investments (it’s RSP time), children’s university, marital split, or debt consolidation, please contact me as soon as possible. A lender approval must be secured before March 17th to have a 90% refinance.
Government no longer backing HELOCs – Home Equity Lines of Credit
This will not affect as many consumers but it can still cause problems for clients looking at have a higher loan to value secured line of credit. The government will no longer be insuring any of these products. The effective date on this is April 18, 2011 so a firm approval has to be obtained prior to April 17, 2011.
Kim Gibbons, ” Your Mortgage Superhero ®”
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