The Key Mortgage Changes
• Mortgages with amortization periods longer than 30 years will no longer qualify for government-backed mortgage insurance, which is required for buyers with less than a 20% down payment on a home. The previous limit was 35 years.
• Maximum amount Canadians can borrow against the value of their homes, lowered to 85% from 90% on a refinancing
• Federal government backing for home equity lines of credit, or so-called HELOCs, is removed
• Adjustments on amortization and refinancing limits coming into force on March 18
• Government backing on HELOCs will be removed as of April 18
Here are some answers to some frequently asked questions that have been confirmed with CMHC, regarding the upcoming changes. Please note answers below apply to transfers/switches, ports and increases, top ups etc.
Question: Does the 85% LTV limit on refinance loans apply to all residential properties with up to 4 units?
Answer: Effective March 18, 2011, refinance loans on all owner occupied residential properties
with up to 4 units are subject to a maximum loan to value ratio of 85% (down from 90%). The
LTV limit for non owner occupied (small rental) properties with 1-4 units remains at the 80% limit that was introduced last year.
Question: Will the new parameters apply to assignment (switch or transfer) of a previously insured loan from one Lender to another?
Answer: No. As long as the loan amount, amortization period and loan to value ratio remain
unchanged, the new parameters will not apply to a switch/transfer/assignment of mortgage to a
different Lender.
Question: CMHC currently has a limit of $200,000 on refinance loans, up to a maximum LTV of
90%. What will be the maximum refinance loan amount once the 85% LTV maximum has been
implemented?
Answer: There will no change in the maximum refinance loan amount. It will remain at
$200,000.
Question: If the current balance of a loan is above 85% LTV can the borrower extend the
amortization period?
Answer: No. Effective March 18, 2011, a refinance loan with LTV above 85% is ineligible for a
new insurance approval, even if the loan amount does not change. An extension of the
amortization period will not be permitted for a loan with LTV above 85%.
Question: In the case of a refinance (or port) where the loan amount is being increased, if the
existing loan has an remaining amortization period of more than 30 years, can the amortization
period be left as is, or does it have to be reduced to 30 years? Would the 30 year limit apply only to the top-up portion?
Answer: The 30 year limit on amortization will apply only to the top up portion. The amortization can
be left as is for the existing portion of the loan.
Question: A borrower has an existing line of credit in place, insured by CMHC. At some point
after the termination of CMHC's Line of Credit product, the borrower decides to sell the home
that is the subject of the insured line of credit, and purchase a subsequent home. The total
amount of financing that the borrower needs for the new home is well above 80%, therefore
mortgage insurance is required. May the borrower port the existing insured line of credit to the next home?
Answer: Due to the discontinuation of CMHC's Line of Credit insurance product, the loan for the
purchase of the new home will have to be an amortizing loan. Depending on the specifics of the
transaction, the borrower may still benefit from premium savings available through CMHC's
Portability feature.
Question: Lines of Credit will no longer be insurable as of April 18, 2011 is there any situation which would quality for an exception, e.g. binding agreement, to allow for these loans to be insured?
Answer: No, Lines of Credit have are subject to an 80% LTV maximum and there is no
requirement for the lender to obtain mortgage insurance when the LTV is 80% or less.
Question: To qualify for an exception from the new parameters, what is considered a "legally
binding agreement" in the case of a refinance loan?
Answer: If the Lender has documentation of a binding agreement to lend between the
Lender and the borrower for a specified loan on a specified property, and that
agreement was dated before March 18, 2011, CMHC will not apply the new parameters, even if
the application for insurance is received by CMHC on or after March 18, 2011.
Question: Will an agreement of purchase and sale dated prior to March 18, 2011 be considered
"legally binding" if there are outstanding conditions that have not been fulfilled prior to March 18?
Answer: Yes, if the date on the agreement of purchase and sale is earlier than March 18, the new parameters will not apply, even if the conditions have not been waived.
