Mortgage rules changed this year, causing some confusion in the market for homebuyers and homeowners alike. However, navigating these changes is relatively simple. With smart financial planning and saving practices you should still be able to finance your dream home while building your savings.
For prospective homebuyers, the biggest change is a reduction in the amortization period - the amount of time after which, if all monthly payments are made on time and in full, the mortgage loan will be repaid.
Under the changes the maximum amortization period was decreased to 30 years from 35 years for all new government-backed insured mortgages. For some homebuyers, particularly those looking for their first home, this change may make it harder to qualify for a mortgage. A shorter period for repayment will mean that your mortgage payments will be greater. However, this shorter period means your mortgage will be paid off faster and you will save on interest.
Although the shorter amortization period may make it more difficult to qualify for a mortgage, it may be a blessing over time as paying down your mortgage faster will give you more security and more cash to put toward other purposes — like retirement or your child's education.
What do new mortgage rules mean for you?
