New Mortgage Rules: Amortization reduced

[ashedfc]

This morning, the Federal Finance Minister announced four changes to Canada's mortgage insurance rules.

1. Amortizations reduced to 25 years
2. Refinancing limited to 80%
3. Properties purchased at over $1 million no longer eligible for mortgage insurance
4. GDS and TDS set at 39% and 44%

These changes, may precipitate the housing market downturn the government so desperately wants to avoid. The changes take effect July 9, 2012.

The only good news is the 5% down payment rule remains intact.. (this will still help first time buyers to be in the game; atleast someone has to buy when there's a flood of selling)..

[Brad]

Reducing ammortizations to 25 years is a good start but I would also like to see the min downpayment increased to 10 or 15%. It is the low downpayments combined with the long ammortizations that have driven house prices to such ridiculous levels to where the average person can no longer afford an average house.

[newbiesaver]

I think it will be a good thing in the long run but in the short-term, this is going to be a blow to those who are trying to buy a house within the more restrictive rules while the house prices have not cooled down yet.

[tjthemanto]

Lot of investors and speculators , most of whom are overseas ( especially in China ) have driven the house prices in Vancouver and Toronto to ridiculous levels. its reached a point where the local Canadians can no longer afford to live in these 2 cities , while these overseas investors and speculators are busy making money by renting their condos and flipping their houses.

Most of these guys don't even pay taxes in Canada and don't contribute to the Canadian economy in any way. This needs to stop. a house is a place where people can live affordably and raise a family, its not a place for these speculators to rip people of.

Theier are lot of social side effects of not having affordable housing in the form of crime etc.

[jayne_a]

With all these new changes, are you now required to have a down payment? I don't mean for a million dollar home, I mean for a house that's $150,000. can i still get a zero down mortgage or are those going too?

[Brad]

Yes you must put 5% down, 0 dp hasn't been allowed since 08.

[ashedfc]

With all these new changes, are you now required to have a down payment? I don't mean for a million dollar home, I mean for a house that's $150,000. can i still get a zero down mortgage or are those going too?

If 5% down payment is a concern, then I would suggest to stay away from the housing market.
Indications are - It has peaked already & is currently in the plateau phase, before it stays stagnant or starts declining..

Its better to watch the housing market correct itself & then probably you can buy a house on Power of Sale, lot cheaper (atleast in relative terms)

[Minou]

I agree... If 5% down is too much, a person really can't afford to buy!

Glad about the amortization change as well, as it will encourage people to buy what they can afford, though I'm sure it will make buying in very expensive markets difficult. In some places, housing is so expensive that I bet that people expect that they'll never actually pay their houses off!

[ZombieMakeup]

Im so glad we bought our house last month. The 5% for us was 12,000$ on a 234,000 house(in a small town) we got 30 years, at 3.4%, and got the 12,000$ put back on our house, which made it around 221,000$, so about 1,300$ + heat hydro etc. which is great, and leaves us with 1,000 extra per month, with bills, food all paid. I was shocked to know that they didn't even want our 12,000$, they just wanted to see if we had the money....(as a first time home buyer) They were very "nosey" though, they wanted our credit card paid off, which we did (3,000$) and proof that our car was paid off. There very strict when it comes to home buying, and I guess being a first time home buyer, its even stricter, so unfortunately for those who are first time home buyers looking for a house after july 9th, will make it a lot harder for those.

[ZombieMakeup]

@BRAD

Your forgetting that, total costs of the house and your bills has to be at 40% or lower to buy a house right, you do realize that people that make under 60k a year will most likely not be able to get accepted for a mortgage. I do not think this is a good choice. This will drive up housing markets, because only those who have money, will be able to afford houses, and those with no money, will not. This makes RENT go up higher, because those renting out houses/apartments will know they won't be going anywhere, anytime soon. = NOT GOOD for the economy. This is a case of the rich gets richer, the poor get poor. Yet another blow from the government, to strap those Middle class people in. There won't be any growing in the economy. How are people suppose to grow the economy if they can't even start?

[lealgen]

Another BIG change I heard about was - "Home equity lines of credit are restricted to a maximum loan amount of 65% of the appraised value of your home down from 80%."

[kanewtz]

This is good news. Personally, I don't see why someone would want to have a 30 year ammortization.
Most people would be simply working in the middle/late 50's simply because they have a mortage instead of retiring? The extra amount of interest is also quite insane.

[ashedfc]

Canadian housing market is going (or has already gone) beyond realistic expectation.
Canadian banks are better managed, but there are risks still out there. Last week RBC was downgraded 2 notch by Moody's, this in itself is enough sign to sense trouble ahead.

Just South of the border, US housing market is still in shambles.
Today the US housing data just came in says "new home sales came in at 369K, a "big beat" to expectations of a 347K print and up from the 343K previously. What does this mean? The chart below sums it up". Last 50yrs data showing where the current housing is..



Just a word of caution- A lot of homeowners are already living on the edge. Once canadian housing starts its much awaited correction, the damage to home equity will be enormous.

[jayne_a]

Zero down mortgages did exist after 08. My question is after July 9 can you still get them? I know they are stopping cash back mortgages but what about other zero down mortgages? While I do appreciate all your opinions, I wanted facts. Sometimes a zero down mortgage is better for some people.

[tjthemanto]

Zero down mortgages did exist after 08. My question is after July 9 can you still get them? I know they are stopping cash back mortgages but what about other zero down mortgages? While I do appreciate all your opinions, I wanted facts. Sometimes a zero down mortgage is better for some people.

You will still get them but you won't get them from the traditional banks and sources like RBC, BMO, CIBC, Scotia, TD, ING etc.

You will have to go to the secondary markets where they will charge you exhorbitant mortgage interest which will be almost double the existing rates. Its going to be kind of the the rates that exist for second mortgages and third mortgages.

But the traditioal sources and the main markets won't give you Zero down mortgages anymore.