As of March 18, 2011, two significant rule changes took effect in Canada, with the third change commencing April 18, 2011:
- The maximum amortization period on insured mortgages with a down payment of less than 20% was reduced from 35 years to 30 years. For a $300,000 mortgage that made an increase of a little over $100 in monthly payments. Of course it also increased the amount of capital being paid off each month. The point in this change was to insure that consumers have sufficient equity in their homes to keep them out of trouble in bad economic times. We need to learn from the misfortune of our friends south of the border.
- Insured refinancing now requires a 15% down payment, up from 10%.
- There is now a 5% minimum down payment required. Line-of-credit used for this 5% is no longer insurable.
These changes only have had a negative impact on highly leveraged purchases resulting in large interest payments and minimal equity in the property. 0% down has never been a good policy. The changes are enforcing what is really sound financial advise, especially for 1st time buyers.