Industry Policy Updates

Please keep in mind the following changes that have recently been made to lending and government policies

1. New mortgage rules have been announced today, Monday, January 17, 2011, in an attempt to curb consumer spending and reduce household debt.  These officially go into effect on March 18, 2011.

a. The maximum amortization period has been reduced to 30 years from 35 years for government-backed insured mortgages with loan-to-value ratios of more than 80%.

b. Refinancing is now limited to a maximum of 85% of the property value, down from the 90% announced in April of 2010.

c. Government insurance backing will now be withdrawn on lines of credit secured by homes.

2. For 2009 and later years, for withdrawals made after January 27, 2009, first-time homebuyers are allowed to withdraw up to $25,000 from their Registered Retirement Savings Plan (RRSP).

3. The Minister of Finance announced the following changes to CMHC lending policies, effective April 19, 2010.

a. All borrowers must meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and a shorter term. This will help Canadians prepare for higher interest rates in the future.

b. A minimum of 20% down payment is now required for all rental property purchases.