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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
