Current Market Trends

New Mortgage Rules, Again???

Monday, January 17, 2011

You bet! Here are the new rules that will be in effect as early as March 18th 2011. Canada is again adjusting the Mortgage Rules in a continued effort to solidify Canada’s Real Estate Market and avoid the overleveraged and under secured real estate failure that we have witnessed south of the border. Annoying? Sure! We just did this April 19, 2010, but I am glad that they are doing it again. Why you ask? Remember that Canada is considered a great place for Real Estate investments. Not only due to the fact that this is one of the best countries in the world, but also because we haven’t been careless with our lending rules. This is the primary reason that we were able to survive this last crash without too much collateral damage. The tighter our lending rules are (within reason of course) the more solid our most important investments become, not to mention the increased propensity of foreign investors buying Canada grown real estate, which further help our investments to appreciate.

So what’s the skinny? Finance Minister Jim Flaherty has made some recent changes to the mortgage lending guidelines

They include;

1. Amortizations to be reduced from 35 years to 30 years
2. maximum refinance ($$ amount people can borrow from their homes) will also be reduced from 90% to 85%
3. Federal government backing for home equity lines of credit (HELOC) to be removed

Adjustments on amortization and refinancing limits coming into force March 18, 2011

Government backing on HELOC’s will be removed as of April 18, 2011
What should we do moving forward? If you are currently thinking about entering the buying market make sure to get in before March 18, 2011 as the decreased maximum amortization period will make your monthly payments higher. That said, it won’t be the end of the world, as you will be paying of your debt faster and ultimately paying less interest over the term. However, you will get less bang for your buck, as the size of the property you can now afford might be less than desired.
If you have any further questions, or are interested in entering the market before the new deadline, feel free to contact me at anytime. .(JavaScript must be enabled to view this email address)

Here is the article from CTV:

Finance Minister Jim Flaherty is expected to introduce new regulations on Monday designed to reduce Canadians' skyrocketing household debt levels.
Flaherty will announce the new measures at a news conference scheduled for 8 a.m., before North American markets open.
CTV News has learned that Flaherty will unveil 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 per cent from the current 90 per cent.
* The government will withdraw its insurance backing on lines of credit secured on homes, such as home equity lines of credit.
According to a government official, the rules are aimed "at encouraging responsible lending and borrowing and encouraging people to increase their home equity."

"The rules are designed to significantly reduce interest payments to help Canadians get rid of their mortgages before they retire," CTV's Ottawa Bureau Chief Robert Fife reported Sunday evening.

The new rules comes on the heels of a Bank of Canada announcement that Canadians' domestic debt burdens had hit the highest levels on record. The bank said earlier this month that the ratio of household debt to disposable income has reached 147 per cent.

Canadian household debt is now at $1.4 trillion, while mortgage delay payments have increased by 50 per cent," Fife said.

"In fact, the International Monetary Fund says household debt is the number one risk to the Canadian economy."






"I am glad that I chose Paul to sell my home. Paul clearly differentiates himself from other real estate professionals through hard work, detailed fact-based analysis and a strong client service focus. Paul always put me and my property first during our work together and I found him to be extremely honest and trustworthy. I would highly recommend Paul to anyone looking for an advisor with his client’s best interests at heart."
~ Hafiz Lalani