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Finance Minister Jim Flaherty's announced new rule changes to the Canadian Mortgage Insurance

Created: 19 January 2011
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Vancouver BC - Jan 19, 2011 The Canadian Mortgage Insurance program will have the following changes.

A reduction to the amortization period of the mortgage from 35 to 30 years. These are for new government backed (or Canadian Insured mortgages only.) when a borrower has less then 20% down payment on their property. At this time, conventional mortgages with down payments of over 20% are not effected. The goal of the government is to reduce the total amount of interest payments Canadians make on their mortgage each month. The hope is to reduce Canadians risk of higher debt exposure, expedite the process of building equity in the home and pay off their mortgage faster.

Another new change is the Canadian Mortgage Insurance program is the maximum about Canadians can borrow with refinancing their mortgage. The new maximum is 85% of the value of the home. In the past, Canadians could borrow up to 90% of the value of their homes when refinancing. The government made this change to promote saving through home ownership and limit the refinancing of debt into mortgages.

Canadian mortgage insurance will also effect home secured lines of credit. Canadians will no longer be able to secure a line of credit on their homes if the loan to value is under 80%. Banks and other lenders at this time will continue to secure lines of credit on homes using their current guidelines.

While Canada Mortgage Insurance has made these changes, many lenders will still allow access to 35-year amortizations as long as the loan to value is over 20%. Rates continue to remain low so there is continued strong demand for purchasing and refinancing.

While refinancing your mortgage will be effected either way, it is not by much. The Canadian Bankers Association released a survey in December 2010 showing Canadians with mortgages which have significant equity in their home, averaging about 50 per cent of the home's value so there is still plenty of room for Canadians to purchase a home, investment properities, recreation properties and refinance with these changes. As well the survey points out that national mortgage-in-arrears numbers remain very low, at less than half of one per cent.

"The real debt load problem is with credit cards and unsecured lines of credit" says Jared Dreyer, President VERICO Dreyer Group Mortgages. "The Canadian government has done nothing to address the lenders rules for consumer qualifications for these products. In my opinion this is the real issue in household debt and it is not being addressed with the lenders at all. We need to provide better education and guidelines on these unsecured products to the consumer. This government by implementing these changes to the Canadian Mortgage Insurance rules has overlooked these issues. Canada does not have the population base to take even more consumers out of the housing market. I hope that the government does address the unsecured banking practices with as much attention as they have with sound secured mortgage debt".

Contact the independent mortgage team of Dreyer Group Mortgages for more information on how these Canadian Mortgage Insurance changes may effect your mortgage.

Call 1-800-687-9020