On January 17, 2011, the Government of Canada announced adjustments to the parameters governing the application of the government’s mortgage loan insurance guarantee.
What are the new mortgage loan insurance requirements?
CMHC will implement the following new measures to all applications for mortgage loan insurance:
Effective March 18, 2011:
Effective April 18, 2011:
I already have an insured mortgage. How will these changes affect me?
CMHC mortgage insurance is good for the life of the mortgage. Borrowers renewing an insured mortgage will not be affected by these changes. For example, if a borrower had a 40 year amortization and there are 37 years remaining on the mortgage, the mortgage can be renewed with a 37 year amortization, as long as no new funds are being added to the mortgage.
What is required to qualify for an exception to the new parameters?
If the approved lender has documentation of a binding purchase and sale, financing or refinancing agreement 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.
Will a purchase and sale agreement dated prior to March 18, 2011 be considered binding if there are outstanding conditions that have not been fulfilled prior to March 18?
Yes, if the date on the purchase and sale agreement is earlier than March 18, the new parameters will not apply, even if the conditions of the agreement have not been waived.
Will the new refinancing rules allow a borrower with a mortgage above 85 per cent loan-to-value (LTV) to refinance by extending the amortization period?
No. Effective March 18, 2011, borrowers will not be permitted to refinance a mortgage above an 85% loan-to-value, unless the borrower has a binding refinance agreement dated prior to March 18, 2011.
I have a written mortgage pre-approval from a lender, dated before March 18, 2011 with a 35 year amortization. Will I still be eligible for a 35 year amortization if I don’t sign an agreement of purchase and sale until March 18 or later?
No, a mortgage pre-approval is not considered to be a “binding agreement”. You may have a 35 year amortization only if your agreement of purchase and sale is dated before March 18, 2011.
Will the new parameters apply to assignment (“switch” or transfer) of a previously-insured loan from one approved lender to another?
No. As long as the loan amount and amortization period are not increased, the new parameters will not apply to a switch/transfer/assignment of mortgage to a different approved lender.
If I sell my current home and buy another, will the new parameters apply if I transfer the outstanding balance of my CMHC-insured mortgage to the new home?
As long as the outstanding balance of the insured loan, the loan-to-value ratio and the remainder of the amortization period are not increased, the new parameters will not apply when the CMHC mortgage insurance is transferred from one home to another.
What if I need to increase the amount of my insured loan when I sell my current home and buy another?
In this situation the new parameters will apply for any insured loan.
Is it only new Home Equity Lines of Credit (HELOCs) that are affected by the new parameters or existing HELOCs as well?
As of April 18, 2011, CMHC will no longer offer mortgage loan insurance on non-amortizing lines of credit to approved lenders, such as HELOCs. However, if a HELOC is already CMHC insured then it remains insured for the life of the mortgage.
HELOCs 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?
No. As of April 18, 2011, non-amortizing lines of credit will not be eligible for mortgage loan insurance. Lenders can continue to offer non-amortizing HELOCs with a loan-to-value ratio up to 80 per cent on an uninsured basis.
If you have any questions, please feel free to contact Scott Dawson by any of the methods below: