Mortgage Update: Rules Tightening 

By now most of us in the Real Estate related Industry are aware of the 3 major changes that will come into effect as of Mar 18/2011. Recent  announcements  by the Department of  Finance have had a mixtures of reactions.

 First let’s discuss the changes:

1)      There will be a reduction in the amortization of Government backed Insured Mortgages from 35 years to 30 Years with a loan to value ratios of more than 80%.

2)      The amount a Canadian can borrow in Financing their home is being reduced from 90% to 85%.

3)       There will be a withdrawal of Government Insured Home Equity Lines of Credit with homes as security.

All of these major changes will impact the market to some degree but experts are saying that the overall impact will be minimal. Smart Home buyers will lock in their mortgages before the deadline of March 18/2011 but there are a few facts that some Homebuyers are not  aware of.

 Until 2006 the acceptable Mortgage Amortization was 25 years and in that year the Conservatives raise it to 40 year. Then in 2008 it was lowered to 35 years and today 2011 it will be lowered again to 30 years, still up from the original 25 years.

Experts are saying that the lowering of acceptable financing from 90% to 85% will hurt the First Time Home buyers slightly initially but will level off.

 As far as the withdrawal of Government  Insured Home Equity Lines of Credit with homes as Security, this is an attempt to  slow the rise in dept of the Canadian Homeowner and ensure that their Equity remains in their homes. The reality is that Growth in Consumer Credit has already decelerated and the ratio of Borrowing to Spending is on its way to a normal level.

 The overall Outlook of the Industry Leaders is that Business will continue as usual despite these latest changes.