In less than seven weeks, 35-year amortizations will disappear on high-ratio insured mortgages. At the same time, the limit on insured refinances will drop to 85% loan-to-value (from 90%).¹

Borrowers have no later than Thursday, March 17 to arrange a signed lender approval under today’s mortgage insurance guidelines.

This affects people that might want:

• A 35-year amortization to boost their monthly cash flow or augment their purchasing power; or…
• A 90% LTV refinance to consolidate high-interest debt, pay for renovations or education, buy investments or fund a rental property down payment

The coming deadline will cause thousands of people to hasten their mortgage plans. Thus far, we’ve heard multiple lenders reporting above-normal mortgage volumes. These elevated volumes will likely continue for the next seven weeks, culminating in an especially busy stretch from March 14-17.

For illustration purposes, assume you want to apply for a $300,000 insured mortgage. Here’s a comparison of lending guidelines before and after March 18.

	Before March 18	After March 18
Maximum high-ratio amortization¹	35 years	30 years
Maximum LTV on a Refinance¹	90%	85%
Minimum qualifying income²	$46,600 (with 35yr amz)	$49,500 (with 30yr amz)
Monthly payment at 3.89% interest³	$1,303 (with 35yr amz)	$1,408 (with 30yr amz)
Maximum insured mortgage refinance	$270,000	$255,000

Quick Tips:

• A handful of lenders are covering legal/registration costs on refinances that close in the next month or two. Ask your mortgage professional for details.
• We’re hearing reports of CMHC scrutinizing 90% LTV refinance applicants more than usual, especially if the applicant has higher-than-normal debt utilization and/or minimum net worth

Stats of Note:

• Roughly 30% of new mortgages last year had 35-year amortizations and first-time homebuyers used them the most.
• TD estimates that the amortization reduction will impact 20,000 home sales (TD projects 2011 home sales at 420,000 units)
• Dropping the amortization from 35 to 30 years cuts peoples’ maximum possible purchase price by 6-7%.
• Roughly 10% or less of mortgagors who refinance get a mortgage over 85% of their home’s value.

---

¹  Certain uninsured mortgages will still be offered with 35-year amortizations and 90% LTV refinance limits.

²  Assumes a qualified borrower with 5% down, 680+ credit score, 44% TDS, a 3.89% interest rate, 1% property taxes, no condo fees or non-mortgage debt, and $100 monthly heat

³  3.89% is an average 5-year fixed mortgage rate today.

---

Rob McLister, CMT