New rules from.Finance Minister Jim Flaherty.

 Here’s a little Q&A on topics that might be top of mind at the moment.

We’ll touch on individual borrower issues first. Then we’ll follow up with a 2nd story on industry implications.

Q:  When must I apply in order to secure a 35-year amortization on a high-ratio mortgage or a 90% loan-to-value refinance?
A:  To be safe, ensure that you are approved by Thursday March 17. Be careful about making changes to your application after March 17 if those changes would require that your application be reapproved. Otherwise your mortgage could be underwritten under the new rules and may not close.

Q:  How are pre-approvals affected?

A:  The act of getting a pre-approval before March 17 does not guarantee you’ll be approved for a 35-year amortization. That’s because insured pre-approvals that turn live after March 17 will be subject to the new amortization limit of 30 years.

“Turn live” refers to the time when a borrower has signed a binding purchase agreement and submitted a full bona fide mortgage application with a specific closing date.

Q:  How will the elimination of 35-year amortizations on high-ratio insured mortgages affect monthly payments?

A:  The payment on a 30-year amortization is $34.72 higher for every $100,000

A:  Lowering the refinance LTV threshold to 85% likely impacts less than a tenth of all refinances (Src: TD).

For those affected, they’ll now be able to refinance anaverage of $17,228 less debt based on the typical Canadian home value. The average Canadian has $25,163 in non-mortgage debt (Src: TransUnion via WSJ). In addition, we’re waiting to confirm how this change affects mortgagors with the Finance Department. We’ll report back shortly once we’re certain. The 85% refi limit also handicaps peoples’ ability to refinance in the event of higher rates or falling home prices. If you’re a mortgage professional, ensure that you counsel clients about

  Q:  Can I still get 40-year amortizations?

Q:  How will the elimination of 35-year amortizations on high-ratio insured mortgages affect monthly payments?

A:  The payment on a 30-year amortization is $34.72 higher for every $100,000 of mortgage, compared to a 35-year amortization. (This assumes a 4% sample interest rate and standard underwriting criteria.)

Q:  How many people will be affected by the reduction to 85% loan-to-value on refinances?

A:  Lowering the refinance LTV threshold to 85% likely impacts less than a tenth of all refinances (Src: TD). For those affected, they’ll now be able to refinance an average of $17,228 less debt based on the typical Canadian home value. The average Canadian has $25,163 in non-mortgage debt (Src: TransUnion via WSJ).