New Mortgage Regulations by Darrin DeRoches January 20 - 26, 2011     The big kahuna Finance Minister Jim Flaherty has announced new mortgage regulations which will help save us from going into a deeper hole than we already have dug!     Flaherty has unveiled three new rules:  Mortgage amortization periods will be reduced to 30 years from 35 years. The maximum amount Canadians can borrow to refinance their mortgages will be lowered to 85 percent from 90 percent.     The government will withdraw its insurance backing on lines of credit secured on homes, such as home equity lines of credit. The change in amortization and refinance borrowing limits will go into effect on March 18, 2011 and the change insurance on home equity lines of credit will go into effect on April 18, 2011. So here we go again! We are being saved from ourselves!  What really is going on?     It seems that we are 1.4 trillion dollars in debt, so the government is worried they may have to payout some insurance, maybe create a job or two or worst yet default on our mortgages and they will have to foreclose on our homes. So instead of doing any positive improvements they have decided to squeeze us a little more. Three years ago we could spread out the payments on our homes to 40 years, the government cut it back to 35 years and now they are cutting it back to 30 year amortization.  Sound simple enough, but for those who have a 40 year amortization coming due next year or two –OUCH! A mortgage worth about 300 grand in the 40 year compared with a new 30 year will be about $170 more a month, depending on the rate.  So conservative the same mortgage will cost about $150 more a month but the only saving grace is the interest rates have dropped.  So the 40 year may be paying 5 percent and the new 30 year will only be about 3 percent so the $170 month will work out to about the same or even a savings, again, depending on the rate.     The next big change is the 85 percent which is down from 90 percent which was 95 percent just last year. Again it sucks you cannot use your biggest cash cow to pay down your debts but big Jim is protecting us from ourselves. But when he withdrew the insurance on these credit lines  – big Jim really screwed us.  The insurance will be the deciding factor on whether you get a credit line or not! Guess what the bank is going to say “we would love to extend you a credit line – but no insurance!”     Access to money will get tight this year, so if you have lines of credit in place make sure the bank will not “call” or “back out” of these agreements.  Watch out – it’s coming. V     Darrin DeRoches is a local real estate and mortgage broker. He can be reached to answer questions, comments or stories about real estate experiences through this weekly column at mail@uniquerealty.ca.