Shorter Mortgage Amortizations

(June 21, 2012 )

Three big changes were introduced by Finance Minister Jim Flaherty today for "high ratio" mortgages:

  1. The maximum amortization period for high ratio mortgages will be shorten from 30 years to 25 years.  Shortening the amortization means both higher monthly payments, and higher income levels needed to qualify for a mortgage.
  2. The government also limited high ratio mortgages to homes with a purchase price of less than $1 million.
  3. The changes will also limit refinancing these loans to 80% of the value of a home, from the current 85%.

"High ratio" mortgage means buying a home with less than 20% downpayment, in which case you are required to pay a one time premium fee for CMHC insurance.

The affect will be felt most significantly by first-time home buyers, who struggle with coming up with the necessary downpayment to buy a decent home.

The changes will come into effect by July 9 of this year.