One of my lenders, Street Capital, just issued a memo addressing some of the questions that people have been asking about the new rules coming into effect on March 18th. I thought that they handled the questions so well it bears repeating here on my blog.
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?
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