July 9th it all changes!  These changes were announced late in June, and now the time is near!

Here’s a brief rundown of the changes …

  • Reducing the maximum amortization period to 25 years from 30 years
  • Reducing the maximum amount of equity homeowners can take out of their homes when refinancing to 80% from the current 85%
  • Limiting the availability of government-backed mortgages to homes with a purchase price of less than $1 million
  • Fixing the maximum gross debt service ratio at 39% and the maximum total debt service ratio at 44%

In 2008 the Government allowed up to 100% financing at 40 year amortizations. If we compare a $300,000 mortgage at 5.79% for 40 years in 2008, the minimum monthly payment required was $1,592.72.
Under the new rules, a $300,000 mortgage for 25 years at a 3.09% five-year fixed rate, the minimum monthly payment required will be $1,433.63.
The difference? Your monthly payment is reduced by $159.09 and you’re mortgage-free 15 years sooner!
Is there a big difference between the 30-year vs 25-year?  The difference is only $52.48 per $100,000 in mortgage debt. As you can see, it actually places Canadians in a better financial position.
As for the refinance limit, this shows us the federal Government wants to ensure caution towards reducing spending and be certain people are not refinancing all the equity out of their homes.
You still have the weekend to review your options with the GLM Mortgage Group to ensure you have the best options and strategies available at all times especially if you have a pre approval or renewal in the upcoming years. You can always count on your AMP when the market changes to advise you on your best options!